Tug-of-War at Play

Last Week in Review: Tug-of-War at Play


The Tug-of-War Continues
Stocks, Bonds, and rates are responding to the tug-of-war playing out between vaccine hopes and the rise in COVID-19 cases, along with additional lockdowns.
Pfizer was out this past week saying its vaccine has a 95% effectiveness rate. Moreover, the firm says they will have 50 million doses available before year-end and as much as 1.3 billion doses available in 2021.
On top of this, Moderna has a very effective vaccine and there are dozens of firms ready to deliver additional doses and therapeutics.
Stocks and rates have moved higher because both are forward-looking. Yes, the rise in cases and hospitalizations is a concern, but at the moment the markets are looking four to six months down the road and there is hope that with a high vaccination rate we can return back to normal sometime in 2021.
Home Builders Are Very Bullish
Single-family Housing Starts showed the highest reading since 2007! Historically low-interest rates and shifting demand to move to the suburbs are the drivers.
The main challenge for builders is keeping up with the demand. Available lots and decreased availability of supplies are headwinds for builders.
One thing is for sure: If land and materials are scarce, expect new home prices, currently averaging $326,000, to continue to climb.
Bottom line: Rates hit historic lows, as reported by Freddie Mac, this week. With a vaccine and more stimulus on the way, it may be difficult to see rates improve much, if at all.