Kelly Evans: Where Are the Buyers?

Scott Mlyn | CNBC

> Not in the Treasury market. Foreign ownership of U.S. Treasuries has fallen to just 33% as of March, down from 50% in 2015. As Peter Boockvar points out this morning, that leaves "the U.S. buyer, whether private or the Federal Reserve's monetization, to pick up the slack." Recall this was Stan Druckenmiller's big warning last year about the dollar and QE--you can read more about that here.  

> Not in the retail names, despite blowout earnings reports. Macy's is up less than 1% after a huge beat-and-raise; Home Depot has turned lower despite reporting a 33% jump in net sales year-on-year. Walmart is up less than 2% after its own huge beat. In two words: priced in. Macy's shares, for instance, had already almost doubled this year. We'll be speaking to CEO Jeff Gennette about all of this at 1 p.m. today.  

> Not as much in the housing market as they'd like to be. The new home construction report this morning showed a pullback that is likely more supply-constrained than demand-driven, a theme we may see across the economy and even in the labor market in the months ahead. Misses because there wasn't enough to build/hire, as opposed to because the economy is slowing down. As Jefferies points out, the gap between building permits and housing starts has "widened significantly" this year, "likely driven by the acute shortage of construction materials." (Relatedly, Bank of America just said it's raising its minimum wage to $25 an hour by 2025.)  

> Speaking of banks, there are plenty of buyers of financials this year. We'll talk to Mike Mayo about this during Power Lunch today as J.P. Morgan's annual shareholder meeting kicks off. As the WSJ points out, the $32 billion that's flowed into financial stocks this year is already a full year record--in less than five months. The KBW Bank index is up 37% year-to-date.  

> But not so much in lumber, all-of-a-sudden. If there's one thing that ties all of the above together, it may be soaring lumber prices this year. Finally, though, they've come off the boil--down for six straight days, fully 24% from the record high on May 7th, as Dom told us yesterday. Prices are still up nearly 4x from a year ago, but as a barometer of the supply crunch/inflation trade, this is definitely one to watch. If the run-up is over, it could signal a huge turning point for the supply crunch/inflation pressures across the economy.  

See you soon!!  


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