April 17, 2019

After years of flirting, the yield curve finally inverted. For the next decade, the U.S. government can borrow at a lower interest rate than it can for the next three months. The bears have been quick to point out the 10-year to 3-month yield curve’s track record for predicting recessions and market performance. The emphasis for the past two years has been on the near-inversion of the 10-year to 2-year yield curve. This portion of the curve has not inverted and is still in the sweet spot where the S&P 500 Index has risen at a rate of 10.6% per year. Naturally, the bears have ignored that inconsistency.

04-17-2019 SPY

The NAHB/Wells Fargo Housing Market Index (HMI) rose one point in April, up in three of the past four months, to 63, matching the consensus. While the index is off its cycle high of 74 reached in December 2017, it is comfortably in expansion territory and the pickup this year is a positive for the Spring home buying season. The latest increase was led by more traffic of prospective buyers. Builder confidence gained in three of the four regions, falling slightly only in the South.

  • The Weekly Retail Chain Store Sales Index rose 2.0% last week and was up 3.3% from a year ago, exceeding its 52-week average for the first time this year as sales growth accelerated with the approach of the Easter holiday.
  • Similarly, Redbook chain-store same-store sales rose 0.7% month-to-date in April, inching closer to the target of a 1.1% gain for the full month.
  • Sales were up 5.0% y/y and are expected to post 5.4% y/y by the end of this month.
  • Redbook noted brisk sales in seasonal categories, such as Easter toys and accessories, candy, apparel, and footwear.

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