Capital Market Implications for the Week of May 21 - 25, 2018
Last week’s economic releases were dominated by home price indices and consumer confidence surveys. Housing prices improved in April, as both the FHFA House Price Index and the S&P CoreLogic CS 20-City Index increased, up 0.1% and 0.5%, respectively. With a shortage of homes for sale, prices have recorded new highs for 17 consecutive months and are now 8.8% above the prior price peak reached in 2007. However, national averages don’t tell the whole story, as cities in the West continue to experience double-digit annual-price gains while gains are more muted in the Mid-West (e.g., Chicago posted the smallest increase at 2.8% year-over-year). Consumer confidence remained high in May, with survey respondents indicating they felt their present situation was better than at any time in the last 15 years.
Last week, domestic stocks were up overall in lackluster trading. The S&P 500 Index advanced 0.3% while the Dow Jones Industrial Average gained 0.2%. There was a reversal of fortune within stock sectors for the week, as interest-rate-sensitive stocks rebounded while energy companies collapsed, down more than -4.0%. Both the Turkish lira and Italian debt (in each case due to political actions) came under selling pressure last week, which sent international stocks, as represented by MSCI EAFE, down -1.5%. Emerging markets were flat. The volatility in European bonds gave Treasuries a boost and bonds closed higher for the week. The Barclays U.S. Aggregate Bond Index gained 0.7% while U.S. corporates rose 0.8%. Ten-year municipal bonds increased 0.4% and high yield bonds ended the week relatively unchanged.