Connect with us

Uncategorized

Realtor.com® Forecasts the 2023 Top Housing Markets

Realtor.com® Forecasts the 2023 Top Housing Markets
PR Newswire
SANTA CLARA, Calif., Dec. 7, 2022

Hartford-West Hartford, Conn., El Paso, Texas, and Louisville, Ky. take top spots in annual ranking of areas poised for highest home price appreciatio…

Published

on

Realtor.com® Forecasts the 2023 Top Housing Markets

PR Newswire

Hartford-West Hartford, Conn., El Paso, Texas, and Louisville, Ky. take top spots in annual ranking of areas poised for highest home price appreciation and sales growth

SANTA CLARA, Calif., Dec. 7, 2022 /PRNewswire/ -- With affordability on home buyers' minds as interest rates continue to increase and outsized price tags have become the pandemic-born norm, Realtor.com® offers hope – and helpful information – for buyers with its 2023 Top Housing Markets forecast. These markets are not only poised to see the strongest combined growth in home sales and listing prices in the coming year, but up to this point they have seen lower price increases, a relatively smaller affordability crunch than other markets across the U.S.

Mainly concentrated in mid-size markets east of the Mississippi, with local industries tied to manufacturing, education, healthcare and government, this year's top 10, in rank order, are Hartford-West Hartford, Conn., El Paso, Texas, Louisville, Ky., Worcester, Mass., Buffalo-Cheektowaga N.Y., Augusta-Richmond County, Ga., Grand Rapids-Wyoming, Mich., Columbia, S.C., Chattanooga, Tenn., and Toledo, Ohio. (See below for the full ranking of the 100 largest U.S. markets.)

Home sales across the top 10 markets are forecasted to grow by 5.2% year-over-year in 2022, whereas the national homes sale projection is for declining sales (-14.1%). Additionally, average home prices in the top 10 are expected to increase 7.3% – compared to 5.4% for the U.S. as a whole.

At a time when housing costs are a concern for many, these areas offer relative affordability, having experienced less of a price surge than other extremely hot, pandemic-era markets. They also have a greater share of homeowners who own their homes outright, without a mortgage, giving more residents equity to build on. In the top 10 markets, about 23% of housing inventory is affordable at the median income level, compared to just 17% of affordable homes nationally. Better affordability offers some insulation from the impact of rising mortgage rates.

"As many households keep a close watch on their spending, we expect these top housing markets to be in relatively high demand," says Realtor.com® Chief Economist Danielle Hale. "We've seen lower price increases, more general affordability and more use of government-backed mortgage products for veterans, first-time and minority buyers in these top markets, providing opportunities for all home buyers to stretch their homebuying dollars. Many of these areas flew under the radar in the pandemic frenzy, and are now well-positioned to bubble up with solid job prospects without the big-city price tag.

Top Markets Sidestepped Steep Prices of 2022
This year's top 10 housing markets didn't get as caught up in the wild buying frenzy – and price increases – of 2022 as other areas. Sale prices in the 12 months ending August 2022 increased by 10.5% on a year-over-year basis, compared to a growth rate of 12.6% for all 100 largest metros. The top markets have also seen less of a dip in sales in recent months, with sales declining by 9.1% year-over-year, compared to an average decline of 12.3% for all 100 metro areas.

"Made in America" Mid-Sized Metros Poised to Bubble Up
Representing a shift from remote-work and tech-industry influenced home buying, this year's top markets have a renewed focus on domestic industry and trade. The pandemic exposed an achilles heel of the far-flung supply chains that had become the norm, namely, that logistics can be disrupted by a wide array of events. This has renewed corporate, government, and consumer focus in these markets where "Made in America" happens.On average, these mid-sized metros employ a higher proportion of workers in manufacturing, government, education and healthcare jobs relative to the 100 largest US metros, while jobs in tech, professional services, information technology and leisure/hospitality are less common in these areas. Having largely avoided the pandemic housing boom that we saw in other markets, home buyers in the top markets can find solid job prospects and affordable housing options.

Attractive to Out-Of-Town Buyers
Almost half of the buyers looking at the top 10 markets are from areas outside those states. For example, in Hartford, Conn., with a median price of $375,000 in October 2022, homebuyers from New York, Boston and Washington, DC, were leading the wave of out-of-state views in the third quarter of 2022, finding a significant value proposition compared not only to the high price of houses in New York City ($670,000), but also the national median ($425,000). With remote work opportunities still robust, and affordability top of mind, these markets will continue to draw buyers from out of state.

Buyers Take Advantage of Government-Backed Loans
Home sales in the top 10 metros also tend to leverage more government-backed mortgage products such as VA loans and FHA loans. Between Jan.-Aug. 2022, the share of mortgaged-sales with a VA loan was 9.4% in the top 10 markets vs. 7.5% among all the 100 markets reviewed. These types of loans help buyers safely enter the market with lower down payments and often slightly lower mortgage rates.

Realtor.com® 2023 Top Housing Markets

1.  Hartford-West Hartford et al, Conn.
November 2022 median home price: $372,000
Forecasted 2023 home sales change: +6.5%
Forecasted 2023 home price change: +8.5%
Forecasted 2023 combined sales and price change: +15.0%

2.  El Paso, Texas
November 2022 median home price: $291,000
Forecasted 2023 home sales change: +8.9%
Forecasted 2023 home price change: +5.4%
Forecasted 2023 combined sales and price change: +14.3%

3.  Louisville et al, Ky-Ind.
November 2022 median home price: $290,000
Forecasted 2023 home sales change: +5.2%
Forecasted 2023 home price change: +8.4%
Forecasted 2023 combined sales and price change: +13.6%

4.  Worcester, Mass.-Conn.
November 2022 median home price: $447,000
Forecasted 2023 home sales change: +2.5%
Forecasted 2023 home price change: +10.6%
Forecasted 2023 combined sales and price change: +13.1%

5.  Buffalo-Cheektowaga et al, N.Y.
November 2022 median home price: $240,000
Forecasted 2023 home sales change: +6.3%
Forecasted 2023 home price change: +6.0%
Forecasted 2023 combined sales and price change: +12.3%

6.  Augusta-Richmond County, Ga.-S.C.
November 2022 median home price: $319,000
Forecasted 2023 home sales change: +6.2%
Forecasted 2023 home price change: +5.7%
Forecasted 2023 combined sales and price change: +11.9%

7.  Grand Rapids-Wy., Mich.
November 2022 median home price: $358,000
Forecasted 2023 home sales change: +1.6%
Forecasted 2023 home price change: +10.0%
Forecasted 2023 combined sales and price change: +11.6%

8.  Columbia, S.C.
November 2022 median home price: $300,000
Forecasted 2023 home sales change: +7.7%
Forecasted 2023 home price change: +3.6%
Forecasted 2023 combined sales and price change: +11.3%

9.  Chattanooga, Tenn.-Ga.
November 2022 median home price: $397,000
Forecasted 2023 home sales change: +2.9%
Forecasted 2023 home price change: +8.2%
Forecasted 2023 combined sales and price change: +11.1%

10.  Toledo, Ohio
November 2022 median home price: $161,000
Forecasted 2023 home sales change: +4.2%
Forecasted 2023 home price change: +6.7%
Forecasted 2023 combined sales and price change: +10.9%

Realtor.com® 2023 Housing Forecast – 100 Largest U.S. Metros (Ranked)

Rank*

Metro

Combined Sales &
Price Change (% Y/Y)

Sales Change
(% Y/Y)

Price Change
(% Y/Y)

1

Hartford-West Hartford-East Hartford, Conn.

15.0 %

6.5 %

8.5 %

2

El Paso, Texas

14.3 %

8.9 %

5.4 %

3

Louisville/Jefferson County, Ky.-Ind.

13.6 %

5.2 %

8.4 %

4

Worcester, Mass.-Conn.

13.1 %

2.5 %

10.6 %

5

Buffalo-Cheektowaga-Niagara Falls, N.Y.

12.3 %

6.3 %

6.0 %

6

Augusta-Richmond County, Ga.-S.C.

11.9 %

6.2 %

5.7 %

7

Grand Rapids-Wyoming, Mich

11.6 %

1.6 %

10.0 %

8

Columbia, S.C.

11.3 %

7.7 %

3.6 %

9

Chattanooga, Tenn.-Ga.

11.1 %

2.9 %

8.2 %

10

Toledo, Ohio

10.9 %

4.2 %

6.7 %

11

Little Rock-North Little Rock-Conway, Ark.

10.8 %

6.2 %

4.6 %

12

Baltimore-Columbia-Towson, Md.

10.4 %

4.9 %

5.5 %

13

Des Moines-West Des Moines, Iowa

10.4 %

4.1 %

6.3 %

14

Columbus, Ohio

9.6 %

4.6 %

5.0 %

15

Pittsburgh, Pa.

9.6 %

4.2 %

5.4 %

16

Springfield, Mass.

9.6 %

0.7 %

8.9 %

17

Omaha-Council Bluffs, Neb.-Iowa

9.5 %

4.7 %

4.8 %

18

Memphis, Tenn.-Miss.-Ark.

9.4 %

2.5 %

6.9 %

19

Cincinnati, Ohio-Ky.-Ind.

9.1 %

3.0 %

6.1 %

20

Kansas City, Mo.-Kan.

9.1 %

1.9 %

7.2 %

21

Virginia Beach-Norfolk-Newport News, Va.-N.C.

9.0 %

3.9 %

5.1 %

22

Boston-Cambridge-Newton, Mass.-N.H.

8.9 %

-0.6 %

9.5 %

23

Dayton-Kettering, Ohio

8.4 %

2.8 %

5.6 %

24

Greensboro-High Point, N.C.

8.4 %

2.2 %

6.2 %

25

Winston-Salem, N.C.

8.2 %

2.4 %

5.8 %

26

Milwaukee-Waukesha-West Allis, Wis.

8.1 %

0.4 %

7.7 %

27

Harrisburg-Carlisle, Pa.

7.7 %

4.7 %

3.0 %

28

Albany-Schenectady-Troy, N.Y.

7.7 %

3.0 %

4.7 %

29

Lansing-East Lansing, Mich

7.5 %

3.1 %

4.4 %

30

Houston-The Woodlands-Sugar Land, Texas

7.4 %

2.9 %

4.5 %

31

San Antonio-New Braunfels, Texas

7.1 %

2.5 %

4.6 %

32

Cleveland-Elyria, Ohio

7.0 %

2.7 %

4.3 %

33

Syracuse, N.Y.

7.0 %

0.9 %

6.1 %

34

Detroit-Warren-Dearborn, Mich

6.9 %

0.7 %

6.2 %

35

Birmingham-Hoover, Ala.

6.9 %

-0.4 %

7.3 %

36

Oklahoma City, Okla.

6.8 %

4.2 %

2.6 %

37

New York-Newark-Jersey City, N.Y.-N.J.-Pa.

6.8 %

1.8 %

5.0 %

37

Indianapolis-Carmel-Anderson, Ind.

6.8 %

-1.0 %

7.8 %

39

Allentown-Bethlehem-Easton, Pa.-N.J.

6.6 %

1.9 %

4.7 %

40

Rochester, N.Y.

6.6 %

1.3 %

5.3 %

41

Durham-Chapel Hill, N.C.

6.6 %

0.7 %

5.9 %

42

Tulsa, Okla.

6.4 %

1.8 %

4.6 %

43

Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.

6.3 %

0.6 %

5.7 %

44

Knoxville, Tenn.

6.1 %

-1.0 %

7.1 %

45

Scranton--Wilkes-Barre--Hazleton, Pa.

5.8 %

0.0 %

5.8 %

46

Portland-South Portland, Maine

5.7 %

-4.6 %

10.3 %

47

New Orleans-Metairie, La.

5.5 %

-0.8 %

6.3 %

48

Dallas-Fort Worth-Arlington, Texas

5.3 %

3.1 %

2.2 %

48

Greenville-Anderson-Mauldin, S.C.

5.3 %

0.4 %

4.9 %

50

Charlotte-Concord-Gastonia, N.C.-S.C.

5.2 %

-0.3 %

5.5 %

51

Richmond, Va.

4.9 %

0.1 %

4.8 %

52

Minneapolis-St. Paul-Bloomington, Minn.-Wis.

4.8 %

-0.8 %

5.6 %

53

Atlanta-Sandy Springs-Roswell, Ga.

4.4 %

-0.3 %

4.7 %

54

McAllen-Edinburg-Mission, Texas

4.3 %

-0.5 %

4.8 %

55

St. Louis, Mo.-Ill.

4.2 %

-0.4 %

4.6 %

56

Madison, Wis.

4.0 %

-5.0 %

9.0 %

57

New Haven-Milford, Conn.

3.5 %

0.0 %

3.5 %

58

Colorado Springs, Colo.

3.5 %

-3.5 %

7.0 %

59

Spokane-Spokane Valley, Wash.

3.5 %

-6.1 %

9.6 %

60

Akron, Ohio

3.0 %

-0.8 %

3.8 %

61

Charleston-North Charleston, S.C.

3.0 %

-1.6 %

4.6 %

62

Providence-Warwick, R.I.-Mass.

2.8 %

-7.0 %

9.8 %

63

Wichita, Kan.

2.7 %

-4.3 %

7.0 %

64

Denver-Aurora-Lakewood, Colo.

2.3 %

-1.9 %

4.2 %

65

Albuquerque, N.M.

2.3 %

-3.0 %

5.3 %

66

Baton Rouge, La.

2.0 %

-5.1 %

7.1 %

67

Jacksonville, Fla.

1.6 %

-3.0 %

4.6 %

68

Nashville-Davidson--Murfreesboro--Franklin, Tenn.

1.6 %

-3.4 %

5.0 %

69

Washington-Arlington-Alexandria, DC-Va.-Md.-W. Va.

1.5 %

-3.5 %

5.0 %

70

Miami-Fort Lauderdale-West Palm Beach, Fla.

1.4 %

-2.0 %

3.4 %

71

Chicago-Naperville-Elgin, Ill.-Ind.-Wis.

1.0 %

-2.1 %

3.1 %

72

Bridgeport-Stamford-Norwalk, Conn.

-0.6 %

-6.5 %

5.9 %

73

Salt Lake City, Utah

-1.8 %

-7.6 %

5.8 %

74

Raleigh, N.C.

-1.9 %

-7.3 %

5.4 %

75

Stockton-Lodi, Calif.

-2.2 %

-8.6 %

6.4 %

76

Boise City, Idaho

-2.2 %

-10.9 %

8.7 %

77

Deltona-Daytona Beach-Ormond Beach, Fla.

-3.1 %

-7.9 %

4.8 %

78

Lakeland-Winter Haven, Fla.

-3.4 %

-5.0 %

1.6 %

79

Seattle-Tacoma-Bellevue, Wash.

-3.5 %

-10.3 %

6.8 %

80

Austin-Round Rock, Texas

-3.6 %

-6.6 %

3.0 %

81

Ogden-Clearfield, Utah

-4.6 %

-11.0 %

6.4 %

82

Urban Honolulu, Hawaii

-4.7 %

-6.6 %

1.9 %

83

Bakersfield, Calif.

-5.5 %

-7.5 %

2.0 %

84

Orlando-Kissimmee-Sanford, Fla.

-5.6 %

-8.5 %

2.9 %

85

Riverside-San Bernardino-Ontario, Calif.

-5.7 %

-7.2 %

1.5 %

86

Cape Coral-Fort Myers, Fla.

-5.8 %

-5.9 %

0.1 %

87

Portland-Vancouver-Hillsboro, Ore.-Wash.

-6.8 %

-10.7 %

3.9 %

88

Sacramento--Roseville--Arden-Arcade, Calif.

-8.4 %

-12.1 %

3.7 %

89

Las Vegas-Henderson-Paradise, Nev.

-8.6 %

-10.9 %

2.3 %

90

San Francisco-Oakland-Hayward, Calif.

-10.0 %

-13.3 %

3.3 %

91

Tucson, Ariz.

-10.2 %

-14.7 %

4.5 %

92

Fresno, Calif.

-11.5 %

-13.7 %

2.2 %

93

Tampa-St. Petersburg-Clearwater, Fla.

-11.7 %

-15.6 %

3.9 %

94

Los Angeles-Long Beach-Anaheim, Calif.

-12.6 %

-15.8 %

3.2 %

95

Palm Bay-Melbourne-Titusville, Fla.

-15.5 %

-18.3 %

2.8 %

96

Phoenix-Mesa-Scottsdale, Ariz.

-15.8 %

-18.4 %

2.6 %

97

San Diego-Carlsbad, Calif.

-23.7 %

-27.3 %

3.6 %

98

North Port-Sarasota-Bradenton, Fla.

-25.5 %

-28.7 %

3.2 %

99

San Jose-Sunnyvale-Santa Clara, Calif.

-26.1 %

-28.8 %

2.7 %

100

Oxnard-Thousand Oaks-Ventura, Calif.

-27.4 %

-29.1 %

1.7 %

*Methodology
Realtor.com®'s model-based forecast uses data on the housing market and overall economy to estimate 2023 values for these variables for the 100 largest U.S. metropolitan statistical areas by population size. These markets are then ranked by combined forecasted growth in home prices and sales. In cases of a tie, forecasted year-over-year sales growth was used as a tiebreaker.

About Realtor.com®
Realtor.com® is an open real estate marketplace built for everyone. Realtor.com® pioneered the world of digital real estate more than 25 years ago. Today, through its website and mobile apps, Realtor.com® is a trusted guide for consumers, empowering more people to find their way home by breaking down barriers, helping them make the right connections, and creating confidence through expert insights and guidance. For professionals, Realtor.com® is a trusted partner for business growth, offering consumer connections and branding solutions that help them succeed in today's on-demand world. Realtor.com® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. For more information, visit Realtor.com®.

Media Contact
press@realtor.com 

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/realtorcom-forecasts-the-2023-top-housing-markets-301696722.html

SOURCE Realtor.com

Read More

Continue Reading

Uncategorized

Schedule for Week of January 29, 2023

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.The FOMC meets this week, and the FO…

Published

on

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.

Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.

The FOMC meets this week, and the FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

----- Monday, January 30th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

----- Tuesday, January 31st -----

9:00 AM: FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

9:00 AM ET: S&P/Case-Shiller House Price Index for November.

This graph shows the Year over year change in the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.9% year-over-year increase in the Comp 20 index.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 44.9, down from 45.1 in December.

10:00 AM: The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

----- Wednesday, February 1st -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 235,000 added in December.

10:00 AM: Construction Spending for December. The consensus is for a 0.1% decrease in construction spending.

Job Openings and Labor Turnover Survey10:00 AM ET: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings decreased in November to 10.458 million from 10.512 million in October

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 48.0, down from 48.4 in December.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

Vehicle SalesAll day: Light vehicle sales for January. The consensus is for light vehicle sales to be 14.3 million SAAR in January, up from 13.3 million in December (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

----- Thursday, February 2nd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 200 thousand initial claims, up from 186 thousand last week.
----- Friday, February 3rd -----

Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for December.   The consensus is for 185,000 jobs added, and for the unemployment rate to increase to 3.6%.

There were 223,000 jobs added in December, and the unemployment rate was at 3.5%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The pandemic employment recession was by far the worst recession since WWII in percentage terms. However, as of August 2022, the total number of jobs had returned and are now 1.24 million above pre-pandemic levels.

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 50.3, up from 49.6 in December.

Read More

Continue Reading

Uncategorized

US gov’t $1.5T debt interest will be equal 3X Bitcoin market cap in 2023

The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

Published

on

The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

Commentators believe that Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again.

The latest analysis of U.S. macroeconomic data has led one market strategist to predict quantitative tightening (QT) ending to avoid a “catastrophic debt crisis.”

Analyst: Fed will have “no choice” with rate cuts

The U.S. Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of COVID-19-era money printing.

While interest rate hikes look set to continue declining in scope, some now believe that the Fed will soon have only one option — to halt the process altogether.

“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on Jan. 27.

“Higher for longer is a fantasy not rooted in math reality.”

Henrich uploaded a chart showing interest payments on current U.S. government expenditure, now hurtling toward $1 trillion a year.

A dizzying number, the interest comes from U.S. government debt being over $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have increased by 42%, Henrich noted.

The phenomenon has not gone unnoticed elsewhere in crypto circles. Popular Twitter account Wall Street Silver compared the interest payments as a portion of U.S. tax revenue.

“US paid $853 Billion in Interest for $31 Trillion Debt in 2022; More than Defense Budget in 2023. If the Fed keeps rates at these levels (or higher) we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt,” it wrote.

“The US govt collects about $4.9 trillion in taxes.”
Interest rates on U.S. government debt chart (screenshot). Source: Wall Street Silver/ Twitter

Such a scenario might be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity have corresponded with increased appetite for risk assets across the mainstream investment world.

The Fed’s unwinding of that policy accompanied Bitcoin’s 2022 bear market, and a “pivot” in interest rate hikes is thus seen by many as the first sign of the “good” times returning.

Crypto pain before pleasure?

Not everyone, however, agrees that the impact on risk assets, including crypto, will be all-out positive prior to that.

Related: Bitcoin ‘so bullish’ at $23K as analyst reveals new BTC price metrics

As Cointelegraph reported, ex-BitMEX CEO Arthur Hayes believes that chaos will come first, tanking Bitcoin and altcoins to new lows before any sort of long-term renaissance kicks in.

If the Fed faces a complete lack of options to avoid a meltdown, Hayes believes that the damage will have already been done before QT gives way to quantitative easing.

“This scenario is less ideal because it would mean that everyone who is buying risky assets now would be in store for massive drawdowns in performance. 2023 could be just as bad as 2022 until the Fed pivots,” he wrote in a blog post this month.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Read More

Continue Reading

Uncategorized

Stay Ahead of GDP: 3 Charts to Become a Smarter Trader

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report…

Published

on

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report showed the U.S. economy grew by 2.9% in the quarter, and Wall Street wasn't disappointed. The day the report was released, the market closed higher, with the Dow Jones Industrial Average ($DJIA) up 0.61%, the S&P 500 index ($SPX) up 1.1%, and the Nasdaq Composite ($COMPQ) up 1.76%. Consumer Discretionary, Technology, and Energy were the top-performing S&P sectors.

Add to the GDP report strong earnings from Tesla, Inc. (TSLA) and a mega announcement from Chevron Corp. (CVX)—raising dividends and a $75 billion buyback round—and you get a strong day in the stock markets.

Why is the GDP Report Important?

If a country's GDP is growing faster than expected, it could be a positive indication of economic strength. It means that consumer spending, business investment, and exports, among other factors, are going strong. But the GDP is just one indicator, and one indicator doesn't necessarily tell the whole story. It's a good idea to look at other indicators, such as the unemployment rate, inflation, and consumer sentiment, before making a conclusion.

Inflation appears to be cooling, but the labor market continues to be strong. The Fed has stated in many of its previous meetings that it'll be closely watching the labor market. So that'll be a sticky point as we get close to the next Fed meeting. Consumer spending is also strong, according to the GDP report. But that could have been because of increased auto sales and spending on services such as health care, personal care, and utilities. Retail sales released earlier in January indicated that holiday sales were lower.

There's a chance we could see retail sales slowing in Q1 2023 as some households run out of savings that were accumulated during the pandemic. This is something to keep an eye on going forward, as a slowdown in retail sales could mean increases in inventories. And this is something that could decrease economic activity.

Overall, the recent GDP report indicates the U.S. economy is strong, although some economists feel we'll probably see some downside in 2023, though not a recession. But the one drawback of the GDP report is that it's lagging. It comes out after the fact. Wouldn't it be great if you had known this ahead of time so you could position your trades to take advantage of the rally? While there's no way to know with 100% accuracy, there are ways to identify probable events.

3 Ways To Stay Ahead of the Curve

Instead of waiting for three months to get next quarter's GDP report, you can gauge the potential strength or weakness of the overall U.S. economy. Steven Sears, in his book The Indomitable Investor, suggested looking at these charts:

  • Copper prices
  • High-yield corporate bonds
  • Small-cap stocks

Copper: An Economic Indicator

You may not hear much about copper, but it's used in the manufacture of several goods and in construction. Given that manufacturing and construction make up a big chunk of economic activity, the red metal is more important than you may have thought. If you look at the chart of copper futures ($COPPER) you'll see that, in October 2022, the price of copper was trading sideways, but, in November, its price rose and trended quite a bit higher. This would have been an indication of a strengthening economy.

CHART 1: COPPER CONTINUOUS FUTURES CONTRACTS. Copper prices have been rising since November 2022. Chart source: StockCharts.com. For illustrative purposes only.

High-Yield Bonds: Risk On Indicator

The higher the risk, the higher the yield. That's the premise behind high-yield bonds. In short, companies that are leveraged, smaller, or just starting to grow may not have the solid balance sheets that more established companies are likely to have. If the economy slows down, investors are likely to sell the high-yield bonds and pick up the safer U.S. Treasury bonds.

Why the flight to safety? It's because when the economy is sluggish, the companies that issue the high-yield bonds tend to find it difficult to service their debts. When the economy is expanding, the opposite happens—they tend to perform better.

The chart below of the Dow Jones Corporate Bond Index ($DJCB) shows that, since the end of October 2022, the index trended higher. Similar to copper prices, high-yield corporate bond activity was also indicating economic expansion. You'll see similar action in charts of high-yield bond exchange-traded funds (ETFs) such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays High Yield Bond ETF (JNK).

CHART 2: HIGH-YIELD BONDS TRENDING HIGHER. The Dow Jones Corporate Bond Index ($DJCB) has been trending higher since end of October 2022.Chart source: StockCharts.com. For illustrative purposes only.

Small-Cap Stocks: They're Sensitive

Pull up a chart of the iShares Russell 2000 ETF (IWM) and you'll see similar price action (see chart 3). Since mid-October, small-cap stocks (the Russell 2000 index is made up of 2000 small companies) have been moving higher.

CHART 3: SMALL-CAP STOCKS TRENDING HIGHER. When the economy is expanding, small-cap stocks trend higher.Chart source: StockCharts.com. For illustrative purposes only.

Three's Company

If all three of these indicators are showing strength, you can expect the GDP number to be strong. There are times when the GDP number may not impact the markets, but, when inflation is a problem and the Fed is trying to curb it by raising interest rates, the GDP number tends to impact the markets.

This scenario is likely to play out in 2023, so it would be worth your while to set up a GDP Tracker ChartList. Want a live link to the charts used in this article? They're all right here.


Jayanthi Gopalakrishnan

Director, Site Content

StockCharts.com

 

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Read More

Continue Reading

Trending