Monday's Scoop: High☀️

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Here’s what you need to know today…

1. Vibes have improved among consumers.

2. People are not interested in selling their homes.

3. Working remotely doesn’t affect productivity.

S&P 500: 4,850.43
1Mo: +2% | 1Yr: +21% | 5Yr: +82%

The market notched a new record high today, signaling a new bull market on the back of increased economic optimism and some good financial updates from the tech sector last week.

Americans have started feeling better about the economy. The University of Michigan Consumer Sentiment index jumped in January to the highest level in 2.5 years, continuing the climb from last month. People are less worried about inflation and feel pretty good about the job market. Sentiment hit record lows in June 2022 but has rebounded 60% to within 7% of its 45-year historical average. Republicans feel much worse about the economy than Democrats.

High mortgage costs have frozen the housing market. The National Association of Realtors’s December report showed the fewest homes sold in over 13 years. Home resales dropped to the lowest level since 1995. Most of the market has no mortgage or a low rate from a few years ago, so people don’t want to sell their homes and be forced to take on a much higher monthly mortgage cost. There were only 1 million existing homes on the market in December, roughly half of what it was in 2019. Construction is picking up, but new homes comprise a small portion of the market.

Don’t let your boss fool you - remote workers are just as productive. The Federal Reserve Bank of San Francisco released new research indicating “little evidence in industry data that the shift to remote and hybrid work has either substantially held back or boosted the rate of productivity growth.” After analyzing trends across 43 industries, officials found no real difference whether people were in person. Roughly 30% of all work is done remotely as of December 2023.

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Are we in a bull or bear market?

Bears and bulls are Wall Street's favorite animals. Bearish means pessimistic. Bullish means optimistic. Someone can be bearish on a particular stock or broader market, while another investor can be bullish on the same thing. The market is made up of bulls and bears buying and selling to each other.

Investors also apply those animal terms to general market cycles. A bear market starts when the stock market falls more than 20% from its recent highs. That happened in 2022. The bull market definition is a little less clear. Some say it starts when the stock market rises 20% from its recent lows. Remember, that doesn’t mean it has recovered to the previous high. That would require a 25% gain (if 100 drops to 80, that 20 to get back to 100 is 25% of 80). So that’s why some prefer to call it a new bull market only after the market makes a new high.

Bull and bear markets don’t really mean anything other than to characterize the general investor sentiment. Since we know short-term stock market moves are all about investors’ emotions, designating a consensus emotion can have compounding effects. It’s easier to be optimistic if you hear everyone’s optimistic.