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The market's biggest trades sending skeptical message on U.S. stocks
The market's biggest trades sending skeptical message on U.S. stocks

CNBC

time2 days ago

  • Business
  • CNBC

The market's biggest trades sending skeptical message on U.S. stocks

This year has already packed a lot of action into stocks: an aggressively bullish start, a swift correction, and a full recovery from those April losses. But based on the the flows into the U.S. exchange-traded funds, where much of the daily trading action occurs across asset classes, the message coming through most clearly from investors is lingering skepticism about the strength of the U.S. equities market. May was a great month for stocks, with the S&P 500 Index up over 6%, the Nasdaq Composite up over 9%, and the Dow Jones Industrial Average up roughly 4%. But making up for April's losses hasn't removed the underlying fears from the market, with stocks sliding to start the month of June on Monday as trade uncertainty, from the state of U.S.-China deal talks to the Trump administration's battle with courts over the legality of tariffs, continue to serve as hurdles for sustained momentum. At the start of 2025, equity ETFs were trading roughly $3 billion in daily inflows, an "extreme" level of bullishness, according to recent report from Strategas Securities. Since the market recovered all of its April losses, those daily inflows have fallen by more than half, to roughly $1.4 billion, despite the rally. Where has the money been going? "Mostly, just hiding out in ultra-short duration," said Todd Sohn, senior ETF and technical strategist at Strategas, on a recent "ETF Edge" podcast. The iShares 0-3 Month Treasury Bond ETF (SGOV) and SPDR Bloomberg 1-3 T-Bill ETF (BIL) are both among the top 10 ETFs in investor flows this year, taking in over $25 billion in assets. "Skepticism, that's what the equity flows are telling us," said Sohn of the action since the market low in April. He added this suggests a year that could follow a pattern from bull market history, what he called a "reset year." Going back to 1950, years one and two of a bull market generate linear returns that take all equities higher, while third years are more often reset years that tend to reflect a cautious stance on stocks. Or, as Sohn put it: "How much of a good thing can last is a fair question." Since getting back to even, the U.S. market's 0.6% performance year-to-date through the end of May places it at the bottom of the list for 2025 relative to the performance of regional markets around the world, though it is by no means the worst country market in the world. But at least to date, the ETF flows do suggest a "year three" of a bull market cycle, which tends to more often be a trader year than investor year, with a wide dispersion in returns across equity sectors, according to Sohn. Coming off back-to-back years with 20 percent-plus returns for U.S. stocks, the top ETF categories in flows since the April 8 low are crypto, short duration bond, T-bill ETFs, and value (including overseas value stocks such as EAFE ETFs). Meanwhile, tech ETFs, single-stock levered ETFs, and cyclical and small-cap stock ETFs that are most closely linked to aggressive stock bets and conviction about the overall health of domestic economy are near the bottom of the list, with negative flows since the April low. "Folks want to hang out on the short-end of the [bond yield] curve and are very skeptical on what to do about U.S. equities," said Sohn. "It's almost like they are throwing in the towel on cyclicals and small-caps," he added. Part of the reason for the lack of interest in cyclicals is related to the yields currently on offer in the bond market, which can make cyclical plays with healthy dividend levels, such as consumer staples, financials, industrials, and materials, less attractive to investors who might otherwise assume the stock market risk for the income component. "That has disappeared with the return of bond yields," said Sohn. "There's not really any reason to hold," he added, as all the income flows that in the past may have gone into income-producing equities go to short duration bond ETFs instead. One place where investors should keep the faith with U.S. corporations is with their ability to fund bond payments, Joanna Gallegos, BondBloxx ETFs co-founder, said on "ETF Edge." After the strong years of 2023 and 2024, corporate credit sheets are "set up to weather the storm," Gallegos said, and she added that it is possible to stay shorter in corporate credit without exposing oneself to a high level of interest rate risk. After short duration bonds and T-bills, intermediate duration bonds have seen the most daily ETF flows since the April low among fixed-income categories, and are fifth overall in flows among stock and bond ETF asset classes, according to Strategas. Unlike equities, most fixed income categories have had positive returns year to date, even with yields near their highest levels in years, according to BondBloxx data. "Income is back. In fixed income, that's what is important right now," she said. "Any investor trying to offset volatility in their equity portfolio, if they haven't looked at how income is serving their portfolio, that's what they should do," Gallegos said. While Gallegos recommends investors consider investment grade credits in the BBB class, where yields are near 5%, and the first rung of the high-yield universe, BB, where yields are roughly 6%, short-duration yields are the most popular right now for a good reason. "It is hard to argue with 4-4.25% with no volatility," Sohn said. Disclaimer

Mortgage payments have more than doubled since 2020
Mortgage payments have more than doubled since 2020

Yahoo

time15-05-2025

  • Business
  • Yahoo

Mortgage payments have more than doubled since 2020

Yahoo Finance host Julie Hyman reviews the latest data out from Strategas, illustrating how mortgage payments have more than doubled over the past five years, adding to the long-existing home affordability crisis in the US. To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend here. Well, the average estimated monthly mortgage payment has more than doubled in just over five years. And Yahoo! Finance's Julie Hyman joins us now with a closer look in our chart of the day, Julie. Homebuyers have patiently been waiting for relief on the mortgage rate front, and it hasn't really arrived. And this is, uh, feeling its way throughout the system in a number of different ways. But let's get to the chart, first of all, because this comes to us courtesy of Strategas. They're looking at a 30 rate, uh, 30-year fixed rate mortgage. They're looking at the median home price. You add them up, and what you get as of April was a monthly payment of over $2,600, which, indeed, is a more than doubling from where it was at the end of 2019. And this sort of explains why we have seen some of the dismal numbers coming out of the homebuilding industry. Just today, the National Homebuilders, uh, coming out with their confidence index. It was the lowest since late 2023. Uh, tomorrow, we're going to get how- housing starts numbers, we're going to get building permits numbers. And this is also why, one of the many reasons why there's so much focus on the Federal Reserve and what they're doing with rates, because rates tend to be indexed to what we see for mortgage rates. Now, Ryan Grabinski over at Strategas writing, housing has an affordability problem. And this chart makes it very obvious why that is a problem. He also points out that when you look at lower income consumers, when you start to go up the income spectrum, the balance of people's net worth tilts more towards other types of assets besides real estate, namely stocks. On the lower end of the income spectrum, a lot of people's net worth tends to be tied up in their home. So if there is a freeze on new home buying, for example, if there are not new people entering the market, for example, that can be a problem throughout the economy. It's also, by the way, all of this is a problem for home building stocks. I was taking a look at some of the returns. Here you got the year to date, just equal waiting it, so you can see the red here that we are seeing across the board for many of the homebuilders which have been experiencing a lot of pain here. A lot of them have been offering incentives to get people into homes. Sign in to access your portfolio

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