The Market Bull – January 30, 2020
Solid earnings data and some decent economic reports helped the major averages to overcome large early losses to close with modest gains.
4th quarter preliminary Gross Domestic Product or GDP came in as expected with 2.1% growth. Closing another year of GDP below 3% and demonstrating once again that Trump is long on rhetoric and short on facts and results. Interestingly the 2.1% growth was defined as “economic potential” meaning more or less expected economic growth. Prior to the Great Financial Crisis economic potential was widely figured to be about 3.25%. This strongly suggests that unproductive debt does indeed crowd out economic growth keeping with long standing economic theory. The details of the report were fairly positive noting that consumer spending and the capital markets would likely support GDP growth this year. Recent trade deals and lower interest rates should also help. The big unknown of course is the Chinese flu epidemic seemingly getting underway and looking like it might have the ability to seriously derail global economic growth expectations. But at this point that is a matter of great speculation as nobody really knows because it is just too early. Come the end of February and the picture will be much clearer. Either a full-blown epidemic will be in play, or it will turn out to be much ado about little.
The homeownership rate steadily improved in 2019 reaching 65.1% in the 4th quarter. The vacancy rate held more or less steady at 1.4% implying that most homes are in fact owner occupied. The rental vacancy rate drifted lower last year falling to 6.4% in the 4th quarter. The median asking price for a vacant unit finished the year at $226,800 a respectable gain of $18,500 or 8.9%. Median asking rent for a vacant unit was essentially unchanged for the year at $1,005.
As expected, the Fed left interest rates unchanged at the conclusion of its latest Federal Open Market Committee meeting. Interest on excess reserves was increased slightly to 1.6%. The accompanying statement contained no surprises or any meaningful changes.
Standard and Poors 500 Index closed at: 3,283.66 up 10.26
NASDAQ finished the day: 9,298.93 up 23.77
Gold ended trading at: $1,573.40 up $3.00