Martin North – Page 16 – Digital Finance Analytics (DFA) Blog

Is Property Springing Into Life, Or Catching A Cold?

Whilst data should be immutable, interpretation of said data can be tweaked and turned, to spin a particular story. As we have seen in the press this past week. Take, for example auction clearance results.

The preliminary auction clearance rates for this past weekend in the biggest markets of Sydney and Melbourne came out tracking nationally at 71.4 per cent of homes listed for auction based on CoreLogic data. Sydney’s clearance rate was 74.9 per cent and Melbourne’s 68.7 per cent, more or less in line with the previous week. Among the smaller capitals, Adelaide led the way with a clearance rate at 79.5 per cent, followed by Brisbane at 67.3 per cent and Canberra at 56.5 per cent, according to CoreLogic data. But these are on very low counts, so again not that meaningful.

Domain on the other hand reported a Sydney clearance of 67.8% up from 64.2% last week, and below the 68.7% from a year ago. Melbourne was at 62.4% compared with 59.6% last week, and 61.9% a year back. The national number was 63.5%, a significant divergence from CoreLogic’s higher 71.4%.

There are a few points worth making here. The final numbers tend to settle lower, because agents are always keen to promote successful sales, while those passed in are either never reported, or reported later. Some properties are withdrawn before auction, either because they are sold prior, or because the vendor changes tack. As such auction clearance rates do not tell us much at all.

Of course, the spring selling season is now ramping up, and about 2300 auctions are scheduled in the coming week, compared with around 2,000 this past couple of weeks. And listings are rising as vendors decide to sell or are forced to sell. We will chat about this again on Mondays Rant with Edwin. But we do continue to see a spate of ex-investment properties listing, especially in Melbourne, as I reported recently, and the trend is widening.

The bottom line of course is potential buyers should be careful what they purchase, especially as price growth ahead is not assured, especially if the weaker demand for iron ore puts the economy into recession. And prospective sellers would do well to select their agents carefully, as some are still pushing the auction route, one which does not necessarily guarantee a better net sale price, but which does guarantee more income for agents via their additional marketing and auction fees. Just saying!

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Rate Cuts Incoming: But Be Careful What You Wish For!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, while covering commodities and crypto on the way.

Weird though it seems, a short speech given by an elderly gentleman in a valley and wilderness recreation area in western Wyoming had the markets on edge all week, following the fall then rise of markets this past few weeks. The mini-stroke that roiled global markets a few weeks ago is a fading memory, with the market resuming its steady march higher; the S&P 500 is now up 19 per cent for the year, and almost 37 per cent from last November, when the current bull market rally really got going.

Of course we are talking about FED Chair Jerome Powell, and his speech at Jackson Hole as part of the Central Bankers’ summer love-in on Friday. Just four minutes and 50 seconds into his speech, he gave the market what it wanted to hear.

“The time has come for policy to adjust,” the Federal Reserve chairman said in his long-awaited speech at the Fed’s annual Jackson Hole symposium.

“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

As always, the markets heard what they wanted to hear, and acted accordingly, Wall Street leapt higher and bond yields fell.

At the close in NYSE, the Dow Jones Industrial Average added 1.14% to hit a new 1-month high, while the S&P 500 index climbed 1.15%, and the NASDAQ Composite index climbed 1.45%.

But while the rate cut signal is now clear, should markets rally? You may want to reflect on this. In the first 200 days following the first rate cut, equities typically decline by 23 per cent on average. The start of the rate cycle signals the beginning of a deterioration in growth and profits.

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Austerity By Design: Who’s Taking The BIS? With Elisa Barwick

In this show we look at the technocrats at the Bank for International Settlements, how they came to hold so much power, and what that means for us today. Timely, given the Jackson Hole bankers “love-in” happening this week.

This builds on my earlier show “Who Killed The Australian Dream?” recorded with Elisa Barwick from the Australian Citizens Party, see the link here. https://youtu.be/9YbCc9NxBfs

Links to Elisa’s research:

https://citizensparty.org.au/sites/default/files/2024-07/neoliberalism-home-ownership.pdf

https://citizensparty.org.au/sites/default/files/2024-05/hijacking-australian-banking.pdf

https://citizensparty.org.au/sites/default/files/2024-04/kennett-austerity.pdf

https://citizensparty.org.au/sites/default/files/2024-01/austerity_series-sm.pdf

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Is Melbourne The Property Problem Child?

You may recall that I often say, there is not one property market but many micro markets that behave in quite different ways. But at the capital city level, Melbourne appears to be in some strife in terms of price falls at the moment.

Overall, it certainly looks like the combined impact of state policy, higher interest rates, and also bad planning decisions, combined with significant interstate migration away from Melbourne, which is offsetting still too high net overseas migration, is translating into property weakness. That said, of course property still remains over expensive relative to income to a stupid amount, while the restriction of international studies this year will weaken demand for rental property, so while the currently rental growth is still 7.8% over the part year according to CoreLogic, it may well begin to weaken ahead, putting more pressure on property investors in the area.

It does indeed look like for now Melbourne is a property problem child, but it also to me highlights the exposure that Perth has given the risks to mining demand from a weaker China. And as the RBA minutes reinforced yesterday, its not likely we will see rate cuts anytime soon.

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Return To Plan A (For Now) Says The Market As New Data Swings!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, while also covering the action in commodities and crypto along the ways.

My analogy of traders on a boat, running from one side of the deck to the other still holds, as the recession iceberg melts away for now, and an immaculate US soft landing is back in vogue. The change in sentiment was driven by a flurry of data which showed US economic resilience, and this drove stocks to their best week this year, coupled with dip buyers stepping in after the recent rout. So, Wall Street posted its best seven-day run in almost two years while the VIX slid back to 14.80.

Of course, traders have struggled to forecast where the economy is headed – and the recession fears that helped drive the recent pullback could resurface again just as quickly as they faded. On top of that, the US elections and geopolitical tensions are adding other elements of uncertainty.

But beneath the surface, there are some reassuring signals. Specifically, the latest jobs data was better than previous ones, the CPI data showed a drift in the right direction, along with producer prices, consumer sentiment improved with the August University of Michigan consumer sentiment survey reading of 67.8, up from July’s 66.4. and retail sales were up. Just don’t mention the poor construction data with weak July housing starts and building permits data. Central bankers are being quote, data dependent, so no surprise then when new data arrives traders change tack.

Federal Reserve Bank of Chicago President on Friday told National Public Radio that the U.S. economy is not showing signs of overheating, so central bank officials should be wary of keeping restrictive policy in place longer than necessary. “You don’t want to tighten any longer than you have to,” Goolsbee said. “And the reason you’d want to tighten is if you’re afraid the economy is overheating, and this is not what an overheating economy looks like to me.”

Note also the earlier selloff hit a relatively small slice of the market, with nowhere near the breadth of the routs set off by the Fed’s rate hikes, the pandemic and other pivotal events. And while valuations are at risk of another recalibration if the economy does wind up sputtering, the S&P 500 during the recent retreat held above a threshold that – to technical analysts, at least – telegraphs investors’ continued confidence.

The Dow ended up 0.24%, the S&P 500 rose to around 5,555 up 0.2% For the year, the S&P 500 is up more than 16% and is within about 2% from its July all-time closing high. The NASDAQ rose 0.2%. Most megacaps gained, with Nvidia leading the charge, up 1.4% and has bounced more than 20%, while the Philadelphia SE Semiconductor index has gained more than 14% from recent lows. Small-cap shares, which had been strong performers in July, have also recovered from recent lows, with the Russell 2000 up nearly 5%. Nike had its longest winning streak in more than eight years and up 0.88% on the day though Applied Materials sank 1.86% after a sales forecast that disappointed investors looking for a bigger payoff from artificial intelligence spending. If you are an AI fan, like Wedbush, then the outlook looks rosy, saying the tech sector is on the brink of substantial growth, underpinned by the expanding influence of AI. Just remember Cisco, though. The firm emphasized the foundational role of cloud and AI technologies in the ongoing “4th Industrial Revolution.”

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