This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.
March 19: The personal saving rate soared in fourth-quarter 2020, with more stimulus checks on the way in the first quarter of this year. The personal saving rate is now the highest since the mid-1940s. Higher savings usually means higher investment and higher growth. And that is clearly what the Federal Reserve and the Biden administration hope—me, too.
I have some doubts, however. Some of the high personal savings represents a consumer shut down and working from home. This was due to the pandemic. It may also be that the high-spending American consumer now wants to “save for a rainy day.” But, much of it is simply a transfer payment from the government to the consumer. This is all largely financed by the Fed at very low interest rates. Still, it represents a surge in government deficits and debt, and that also means negative government savings.
Thus, when one looks at overall net national savings, one sees that unlike the late 1940s on the personal saving rate, the overall savings rate is quite low. I suspect that means that while [the jump in personal savings] will be correct for booming growth in 2021, it is not a game changer longer term.
Housing Starts Will Rebound
March 17: Low but not quite low enough would be a good way to summarize our forecast of February housing starts. Total housing starts fell to an annual rate of 1.421 million units in February, a touch below our forecast of 1.431 million units. Our forecast was the lowest in the surveys in which we participate, with the consensus forecast calling for a starts rate of 1.560 million units. Total housing permits fell to an annual rate of 1.682 million units, slightly above our forecast of 1.663 million units but below the consensus forecast of 1.750 million units.
That our forecast of February construction activity was so far below consensus after long having been well above consensus didn’t reflect a sudden shift in our view of the housing market, but simply reflected what we expected to be significant impacts from the unusually harsh winter weather that pummeled much of the nation in February. Our view is that coming months will bring payback for the slower pace of activity in February, with further upside room for single-family construction. We think that worth noting, as some are already pointing to February’s declines in single-family starts and permits as evidence that rising mortgage interest rates are taking a toll, which we don’t think to be the case.
—Richard F. Moody
Increasing Parallels to 1999
The Lancz Letter
March 17: Investors have had a perfect storm of positives to fuel stocks higher, and that is something that will be hard to sustain. It started with the vaccine news in early November; add in TINA (there is no alternative…