Consumer sentiment numbers continue to show some resilience despite the delta variant and recent plateauing of housing data. Today's report showed a very slight uptick in consumer attitude - looking forward to next weeks housing data.

“I expect a recalibration of expectations for the remainder of the year will follow as today's jobs report and plateauing of housing data now appear to be the late-pandemic norm." — Larry Shover, D. Alexander Capital CIO

A Friday session ahead of summer’s final weekend and investors will continue to reflect on this past weeks housing data including: Pending Home Sales, Construction Spending, Case Shiller (June), and Mortgage Applications.

Housing Starts data did disappoint expectations however, excluding the pandemic the annual pace of housing starts is still at levels not seen since 2006. Overall, a disappointing report but not one that will bring into question the overarching strength in the US housing market — at least not for the time being.

Investors continue to monitor the latest housing data. It has slowed as of late yet has done so from a very high level. Easy financial conditions combined with lower long-term interest rates have helped buoy the data series.

Currently, the combination of wage gains and a reluctance on the part of sidelined workers to reenter the labor market represent the greatest threat to the Federal Reserves wager that supply-driven inflation won’t become self-perpetuating.

The underlying reason for the recent drop in interest rates comes down to the refocus on the risk that the coronavirus variants stall the global progress out of the pandemic. Wobbles in overseas risk assets and an emphasis on the recovery divergences between regions have left the bond market with the decided impression that 2021 isn’t unfolding in line with the optimism reflected in March when 10-year yields reached 1.77%.

Another week with record high equity prices once again reiterated the current paradigm of outperforming risk assets despite the ongoing pandemic and newly introduced uncertainty on the Delta variant.

Markets and investors seem to be divided into two camps. The first thinks growth has peaked, inflation moderated. The second believes there still exists a savings glut and pent-up demand waiting to be unleased on the economy.

Financial conditions remain in record easy territory and the ability of equities to avoid a material correction for the time being, and real interest rates to hold at all-time lows has afforded the Federal Reserve cover in beginning the process of normalizing monetary policy.

The markets have moved on to trading the next stage in the cycle – i.e. recalibrating growth expectations in reflecting the new norm; one in which herd immunity will prove elusive and variant risks (Delta and others) become an ongoing concern.

In the week ahead investors will digest three important economic data points including: building permits, housing starts, and new mortgage applications.

Investors appear confused on why interest rates are dropping. Most of it appears to be related to the Federal Reserve and its pivot towards potentially moving up its timetable on ending its monthly bond purchases.

One of the biggest debates in the economy currently is what exactly is driving interest rates lower?