Chart of the Week and Weekly Report Highlights
This week: Global Policy Pulse, Fed Braking Process, Tech Wreck Check, EM & European Equities, US Treasuries, Asset Breakdown Review.
This email gives you a look at what was in the latest Weekly Insights report
The Weekly Insights Report is part of our entry-level service: summarizing the key points, ideas and charts from our institutional research service.
Chart of the Week - US Housing Better and Worse
Housing Market Risk: The US housing market is both better and worse than pre-financial crisis. On the one hand debt to income ratios have come down a lot — meaning less leverage and therefore less likelihood of negative equity, defaults, credit stress, and systemic risk to the banking system.
Borrowers also have a greater likelihood of having fixed their interest rate, with much less exposure to variable rates this time around.
However — house purchasing power goes down as rates go up. Regardless of mortgage stress, this mathematical fact naturally acts as a sinking lid on house prices.
This is particularly interesting when you realize US housing market valuations have surpassed the extremes of the subprime bubble. So maybe we see less stress given less leverage, but we still likely see a material correction as rate shock meets stretched valuations. At the very least this will act as a clear headwind to growth/confidence.
Key point: US housing market is less leveraged, but more expensive vs pre-08.
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Topics covered in the latest Weekly Insights Report
Aside from the chart above, we looked at several other charts, and took a bite out of some really important macro/asset allocation issues right now:
Global Policy Pulse: (rate hike beatings will continue until morale improves)
Fed Braking Process: slamming on the brakes (and the breaks).
Tech Wreck Check: a progress check on valuations as things unwind.
EM & European Equities: risk triggers and levels in focus.
US Treasuries: yields breaking higher across the curve.
Global Risk Watch: several assets breached key areas last week.
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Callum Thomas
Head of Research and Founder at Topdown Charts
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