(New York)

There has been a lot of gloomy reporting on the real estate market lately (admittedly in this publication too), but the reality is that the market is not in as poor shape as many think. Here are two points to digest. The first is that national US home prices rose 4.3% (annualized) in January, down from a 4.6% gain in December, but still solid. The figure is two percentage points below January of 2018. The second point is that with yields having fallen so far, cheap mortgages (think 4% or less) are back. The big reduction in mortgage expense is fueling fast refinancings, but it also seems like enough to boost home purchases.

FINSUM: The bond market and the Fed’s dovishness might prove to be a big support to the real estate market. Also, considering all the gloomy news, a 4.3% annualized gain in January (the month after the stock market rout) does not seem too bad at all.

(New York)

Climate change is becoming more a reality than some distant fear. However, one of the challenges is forecasting how it will play out and impact different asset classes, many of which come as a surprise (e.g. cruise ships being significantly impacted). One of the aspects that everyone expects is that climate change is going to have a negative impact on commercial real estate, especially because so much debt exists in CRE on the coasts. However, the situation is not as grave as many think. If you analyze the performance of the mortgage market following the 2017 Hurricane Harvey disaster in Houston, one finds that the mortgage market was barely hurt. The reason has multiple causes, but one of the key points is that almost all lenders now require borrowers to have full flood insurance, mitigating risks.

FINSUM: Climate change is going to raise costs in the form of insurance premiums, but it doesn’t seem likely to do catastrophic damage. Even residential real estate, while hurt by Harvey, was not nearly as badly wounded as many expected.

(New York)

Advisors tend to really like dividend stocks, and it makes sense why: clients need good income as they head into retirement. However, this desire leads some (especially retail investors) to overreach, choosing high paying, but ultimately fragile or unsustainable stocks. Right now is a good time to be looking for quality dividend payers, as their valuations relative to the market are the lowest in about 20 years. Some high quality names to look at include Macy’s (6.2%), General Motors (4.1%), Kellogg (4.1%), and Verizon (4.2%).

FINSUM: One of the best ways to judge the quality of dividend stocks is through focusing on free cash flow as that measure shows whether companies can really afford what they are paying out without hurting their underlying business.

(New York)

Another day, another round of bad news on the economy. In what comes as another round of disappointing data, GDP for the fourth quarter was just revised downward from 2.6% to 2.2%, showing the economy finished the year on a softer note than expected. The data adds to the list of poor numbers—labor, housing etc—that have been hitting investors.

FINSUM: Weak economic and housing data have been flowing like a hose lately, and today is no different. This will only add to the downward momentum in yields.

(New York)

Tell us an investment that does well when inflation is rising AND when rates are falling? Most investments are sensitive to one or the other, but gold can benefit from both. Rising inflation (and rates) can lead to gold-buying as a hedge, helping prices, while falling rates make the metal’s zero yield look more attractive (and make it easier for overseas buyers). Yet, conditions in the middle of those two extremes—which have prevailed since the Crisis—are usually bearish for the metal, as it does not have a natural place in the portfolio in such conditions. That said, gold’s outlook is now the best it has been in years, as the economy is weakening and rates look likely to fall, weakening the Dollar and clearing the path for appreciation.

FINSUM: Gold is in the most interesting position we have seen for some time and we are inclined to think it might start to rise out the doldrums.