Daily Market Color

Robust Housing Data Adds to Certainty of Fed Rate Hike

Existing Home Sales Highest in Almost a Decade  As reported by the National Association of Realtors, US home resales in October rose to their highest mark in nine and a half years.  The number of existing home sales increased 2.0% MoM to an annualized rate of 5.6 million, beating expectations for a 0.6% decrease to 5.44 million.  The unexpected jump was attributed to an “unrealized pent-up demand” that had resulted from a tight supply of available homes for sale during the summer months.  Home sales are predicted to experience a slow down over the next few months as mortgage rates begin to rise post-election with increased inflation expectations.

Rate Hike All But Certain
For the first time on record, as indicated by futures, the probability of an increase in the Fed Funds rate come December is 100%.  Robust retail, housing, and labor data at the onset of the fourth quarter provided further evidence of a need for tightening monetary policy, which had already been a likely outcome given the financial implications of a Trump presidency.  Additional signs of a robust economy have been displayed in US equity markets rising to all-time highs alongside Treasury yields touching their highest marks of the year.  All three major US stock indexes finished up between 0.2%-0.4% today while, Treasury yields/swap rates remained largely unchanged on the day.

Trump Outlines Plan to Terminate TPP
In a video posted by his campaign, Donald Trump explained his plan to eliminate the Trans Pacific Partnership (TPP) as soon as his term as president begins, terming the deal “a potential disaster for our country.”  The partnership had been an initiative by President Barack Obama, who sought to lower tariffs between a group of nations that included Japan, Australia, New Zealand, Malaysia, Canada, and Mexico among others in order to boost growth.  In contrast, Trump stated that eliminating the TPP would help to bring additional jobs back to the US.  With the United States stepping back, the partnership will be all but ineffective, however, remaining members have come out and committed to restructuring the agreement with China potentially joining the pact.   

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