Morning Report: Investor confidence slips

Vital Statistics:

 LastChange
S&P futures3,83627.75
Oil (WTI)77.92-1.04
10 year government bond yield 3.88%
30 year fixed rate mortgage 6.51%

Stocks are higher this morning on no real news. Bonds and MBS are down.

The FHFA reported that 30-60 day delinquencies rose 0.4 ppts YOY to 1.2% in the third quarter of 2022. This was a 0.2% increase on a QOQ basis. All buckets – enterprise, government, and other conventional – increased, however government increased the most. Government loans were 3.1% in the 30-60 day bucket which was up 1.4% YOY and 0.6% QOQ. Given that FHA loans are usually high LTV loans, we should see things get worse as home prices decline and these loans slip into negative equity.

Investor confidence turned dour in December, according to the State Street Investor Confidence Index. The index fell 14.4 points to 75.9.

We are seeing investors rotate into defensive names such as utilities and consumer non-discretionary stocks ahead of an expected recession in 2023. The bright side is the next phase will be early-stage cyclicals which includes financials and homebuilders. 2023 will start out as downright awful for housing, however the second half could be brighter, especially if we finally see a pick up in homebuilding.

Initial Jobless claims ticked up 9k to 225k last week. The labor market continues to prove resilient despite other measures of weakness.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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