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A record-high 20% of single-family homes sold are sold to investors, see chart below.
This part of the housing market is less sensitive to the Fed hiking rates and to higher mortgage rates. In that sense, a higher investor share weakens the transmission mechanism of monetary policy to the housing market.
With a high investor share combined with a high level of excess savings in the household sector, the Fed has to raise rates even more and even faster to cool the economy and inflation down. Which increases the likelihood of a harder landing.
See important disclaimers at the bottom of the page.
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Equity investors tend to focus on the upcoming earnings season, i.e., the next three months. This is in contrast to rates investors who normally have a longer horizon, focusing on the next few years.
This fundamental difference in perspective is likely why the uncertainty about the inflation outlook is having a much more significant impact on volatility in rates relative to equities, see chart below.
Rates markets tell us there is a lot of disagreement about where inflation will be over the coming years. And equity markets are saying that inflation will not be a problem for corporate earnings in the future.
We are tracking this divergence in views very closely. Because if inflation is going to be a problem, it will also impact corporate earnings and hence equities.
In short, either inflation is a problem or it is not a problem. Inflation cannot be a problem in rates markets but not a problem in equity markets.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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