Quote of the Week
“Strength is the product of struggle. You must do what others don’t to achieve what others won’t.” – Henry Rollins
The Jobs Market and the Housing Market Shatter Expectations
The US job market gains exceeded all of the expectations in March. The economy added 916,000 jobs, far exceeding the expectations of a 150,000 increase. The only damper on the report is the fact that a lot of the jobs were lower paying in industries such as restaurants and bars. Hey, new jobs are new jobs that actually pay wages that get spent, which will create more jobs.
The US economy is on the rebound.
The other significant statistic has been the increase in home prices which have averaged an +11.2% in major metropolitan areas over the last 12 months. The boom is a result of record low mortgage rates and a shortage of homes for sale. We expect the record increase in prices to start to slow going forward due to increases in mortgage rates and the rising cost to build a new home. For example, the cost of lumber has risen by over 70% in the last year.
On the flip side, the primary factor to keep demand high going forward is the massive number of Millennials entering their prime home buying ages of 30 to 34. This Millennials’ slice of the population is 50% higher than the Boomer’s slice when they were in their prime home buying years.
Today we got the 2nd Quarter Macro Themes from Hedgeye, our data vendor. Based on the data and the mathematics, we are in one of the best environments for the economy and markets in the second quarter. The whole world except China (Quad III) is in Quad II for the second quarter. This should be good going forward. We are invested in Quad II assets, and we will ride the wave as long as it lasts.
One question I am often asked is, “When do I think things will get back to normal or the way it used to be?”
I received this update on where we stand in our progress on “getting back” to normal. I hope this report from Columbia Threadneedle Investments will give you a good status report on our progress.
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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.
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