Investors piling into bonds, high-yield issuers staying away. According to Bank of America Merrill Lynch’s December survey, pessimism among investors is at its highest level in a decade, with November seeing the largest one-month rotation into bonds since the firm started its survey in 2001, though participants remained underweight fixed income in aggregate. At the same time, the Financial Times is reporting that no company has borrowed funds in the $1.2T U.S. high-yield corporate bond market this month. Should the trend continue, it would mark the first month since November 2008 that not a single high-yield bond priced in the market. The moves broadly reflect concerns that a marked slowdown in global growth could be on the horizon; however, while we expect GDP to moderate in developed economies, we see global growth holding near 3.7% in 2019, led by the U.S. and emerging markets economies.*
Housing industry showing signs of life. Data out this morning showed housing starts unexpectedly increased 3.2% in November (est. -0.9%), building permits jumped 5%, and housing completions increased modestly. The positive figures following yesterday’s NAHB Housing Market Index, which came in at its lowest level since May 2015. Tomorrow’s existing home sales report will likely garner outsized attention as investors continue to gauge the status of the overall housing market, which has struggled to keep pace with growth in the overall economy.
Fed meeting preview. The Federal Reserve (Fed) kicked off its final meeting of 2018 today. Financial markets, however, are pricing in expectations for next year as investors’ anxiety about the Fed’s exit from accommodative monetary conditions increases. On the LPL Research blog, due out later today, we highlight investors’ focus on tomorrow’s Fed rate announcement, and unveil our forecasts for monetary policy in 2019.
- Building Permits (Nov, prelim)
- Housing starts (Nov)
- Germany IFO Business Climate (Dec)
- Japan Trade Balance (Nov)
- FOMC Meeting
- Existing Home Sales (Nov)
- UK PPI (Nov)
- UK CPI (Nov)
- Germany PPI (Nov)
- Japan Central Bank Meeting
- Initial Jobless Claims (Dec 15)
- Philadelphia Fed Index (Dec)
- Leading Indicators (Nov)
- UK Retail Sales (Nov)
- Bank Of England Meeting
- Japan Core CPI (Nov)
- Durable Goods Orders (Nov, prelim)
- Personal Income (Nov)
- Univ. Michigan Consumer Sentiment Survey
- Personal Consumption Expenditures
- GDP (Q3, final)
- Eurozone Consumer Confidence
- France GDP
- UK GDP
*Please see the Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets for additional description and disclosure.
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