Daily Commentary

MarketMinder’s View: In addition to being sound, practical advice for would-be homebuyers, this piece also illustrates why calculating returns on real estate isn’t as simple as measuring the percentage difference between your purchase and sale price and then comparing it to the return on stocks, bonds and other securities. It is an enticing way to do it but wrong, because it doesn’t account for the laundry list of ongoing home ownership costs—kind of the Bizarro World version of not accounting for dividends when calculating stock returns. “Homeowner’s insurance, routine maintenance, property taxes and utilities have all been getting more expensive lately. Those expenses added up to an average of $1,180 a month, according to a report in June 2023 from the real-estate firm Zillow and the home-improvement tech company Thumbtack. The monthly mortgage payment for a typical home, assuming a 20% down payment, was $1,770.” And unlike a mortgage, these costs don’t go away once you finish paying your loan (which also has interest costs and possible tax deductions you must factor in). By all means, buy a home for the roof over your head and the joy of putting down roots. But keep a big emergency fund on hand for unexpected maintenance expenses, ensure all monthly costs fit with your budget, and don’t think of it as an investment. It is perhaps better thought of as a depreciating, decaying asset with high, hard-to-tabulate ownership costs.

MarketMinder’s View: Yes, the Institute for Supply Management’s (ISM’s) US Manufacturing Purchasing Managers’ Index (PMI) rose in December, but at 49.3 it still showed contraction—as all readings under 50 do. Fewer businesses reported contraction than in November (48.4), but those reporting expansion were still in the minority, and it was the ninth-straight contraction. Under the hood, things were more mixed, with some patches of potential green shoots. Transportation equipment and machinery manufacturers reported weak demand, but things looked better among manufacturers of electrical equipment, appliances and components, “with some saying that ‘the increase in new orders has our plant at full capacity.’ Makers of miscellaneous goods noted the ‘combo of seasonal factors plus increased demand outlook for 2025.’ Primary metals producers said ‘there is definitely an uptick this month, though not a stable one.’” And the new orders gauge did rise to an expansionary 52.5, up from November’s 50.3 and a second-straight reading that points to growth. So, some encouraging nuggets. The article rightly notes this doesn’t automatically mean a recovery is nigh, but it doesn’t need to be. Manufacturing is a small sliver of US GDP and has been weak for a long while. Services generates the vast majority of US activity and has been growing just fine. Oh, and stocks are very familiar with this trend.

MarketMinder’s View: In line with eurozone trends, Austria held elections in late September and still doesn’t have a government. Three centrist parties spent the past 46 days trying to reach a coalition agreement, but the smallest (Neos) just pulled out, with its leader citing the budget and pension reforms as roadblocks. What next? “The nationalist Freedom Party — which won the highest number of seats of any party in September’s federal election but fell short of the majority needed to form a government — quickly called on Chancellor Karl Nehammer to resign, potentially opening a path for his party to rethink a right-wing alliance.” But the four other parties have thus far refused to work with the Freedom Party. Meanwhile, the traditional centrist People’s Party and Social Democrats have enough seats to form a coalition on paper, but they are bickering over who is to blame for Neos’s walking away. Oh, and echoing the situation in France, the European Commission is debating whether to put Austria on its official deficit naughty list, which would heighten budget debates. Political uncertainty is high across the eurozone right now, with Belgium also deadlocked in coalition negotiations, France facing another budget debate and Germany set for a February snap election. How this chaos resolves and what it does to investor sentiment will be crucial to watch.