Market Commentary 2/7/20

A strong January jobs report reinforced the strength of the domestic economy. However, after a 4-day surge by equities earlier in the week, stocks sold off Friday and bond yields pushed lower. On Friday, bonds took comfort from muted wage inflation and U.S. equities sold off as a response to renewed fears of a coronavirus pandemic still low, but hard to handicap. Equities rallied earlier in the week in response to stronger than expected manufacturing and service sector reports. 

The January jobs report was impressive with 225,000 jobs created versus 164,000 expected. The unemployment rate ticked up to 3.6%, but for good reason, as more people entered the workforce. The Labor Force Participation Rate (LFPR) rose to 63.4%, the highest since 2013. Wage inflation rose month over month, but less than some experts expected given the tight labor market. Bonds rallied (yields moved lower) as wage and overall inflation remain persistently low. 

Keep an eye on China and the coronavirus as unknown risks remain but for the moment appear to be contained. How this virus will affect global growth is yet to be determined, but handicapping this virus is nearly impossible and risk-on/risk-off trading could changes daily as more cases are discovered worldwide, and as scientists gain a deeper understanding of the virus.

Homebuilders remain optimistic and with unprecedented wealth creation in the U.S., this year’s home-buying season is shaping up to be a good one. Affordability and availability of home supply are top concerns. Mortgage rates are compelling and we continue to advise prospective borrowers to consider locking-in interest rates at these historically low levels.