Signs of stabilization in home prices, but rally unlikely: BMO chief economist

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BMO chief economist Doug Porter sees signs of stabilization in Canadian home prices, but he remains skeptical about a sustained rally,

“Canadian home prices ticked up 0.2% in March in seasonally adjusted terms. But that was only a miniscule move stacked up against the near16% drop in the prior 12 months. Sales also nudged up 1.4% month-over-month in adjusted terms, but that left them down 34.4% y/y and more than 20% below a 10-year average. The big story is the drought of homes available for sale. As well-documented by our group, there are a variety of reasons why new listings have dried up to the lowest level in almost two decades. This drop has pushed up the key sales to-new listings ratio to a solid 63.5%. Even smoothing it out over three months (chart), suggests that prices are likely to bottom, if not even turn up if this market balance holds. However, count us as skeptical on whether prices are about to turn meaningfully higher. We suspect that the market is still digesting the massive rate hikes of the past year.”

“BMO: “count us as skeptical on whether [home] prices are about to turn meaningfully higher.” – (research excerpt) Twitter

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BofA Securities equity and quant strategist Savita Subramanian detailed a strong start to U.S. earnings season but also voiced concerns,

“Following a light Week 1, 30 S&P 500 companies (including early reporters) comprising 10% of earnings have reported. Results have been solid: 90% of companies beat on EPS, 73% on sales, and 67% on both, well above last quarter’s 54%/83%/46% post-Week 1 and historical average of 67%/64%/48%. Fueled by bank beats, 1Q EPS is tracking a 30bp surprise … A massive, systemic financial confidence shock appears to have been averted, but tighter credit is manifesting in the real economy: Fastenal, an industrial bellwether, cited softer March sales especially in manufacturing, and consumption slowed in March across income cohorts … Capex, usually hit hard by a credit cycle, has remained robust and could buck trend given multiple secular tailwinds. Tech capex and stock buybacks may be more at risk, where Tech, Communication Services, and Health Care have been the biggest beneficiaries.”

“BofA: Strong start to earnings seasons but credit contraction starting to bite” – (research excerpt) Twitter

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Citi analyst Maximilian Layton sees significant upside for silver prices,

“We note Dec 23 silver is up 13.6% since mid-March and our contract target of $28/oz is within touching distance. We think that the silver bull market has just begun and that prices should rise more than we previously thought, considering that many of the fundamental drivers of the bull market have yet to fully play out (we still see further downside in the dollar, rates, and upside in investor interest in precious metals is likely over the coming months). We raise our prior bullish 0-3 month forecast to $28/oz (from $24/oz), our 6-12 month forecast to $30/oz (from $28/oz), and our annual average price forecast to $27/oz (from $25/oz)… The fundamental story for a precious metal bull market is comparable in our view the 2H’07 and early 2008 macroeconomic environment – in essence, weakening DM growth and strengthening EM growth …Speculative interest (Comex futures and ETF) has much further to run against this sound fundamental backdrop “.

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Diversion: “Apple launches high-yield savings account with 4.15 percent APY” – Ars Technica

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