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Week in preview: Why the Fed will be in the spotlight

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Nov. 20 2020, Updated 1:34 p.m. ET

Next week is all about the FOMC (Federal Open Market Committee) meeting

The FOMC meets on Tuesday and Wednesday, and we should have the announcement on Wednesday afternoon around 2:00 p.m. Taper? By how Much? Which securities? The Fed will also release its forecast of economic activity. The Fed has been consistently over-optimistic on economic growth, and it will be interesting to see how its forecasts stack up to the Street, which is decidedly more bearish. Aside from the FOMC meeting, we do have some important real estate–related data next week, with the NAHB homebuilder sentiment index, existing home sales, housing starts, building permits, and some manufacturing data.

Economic data this week

Monday, September 16

  • Empire manufacturing
  • Industrial production
  • Capacity utilization
  • Manufacturing production

Tuesday, September 17

  • Consumer Price Index
  • TIC flows
  • NAHB Housing Market Index

Wednesday, September 18

  • MBA Mortgage Applications
  • Housing starts
  • Building permits
  • FOMC rate decision

Thursday, September 19

  • Initial jobless claims
  • Bloomberg Consumer Comfort
  • Philly Fed
  • Existing home sales
  • Index of leading economic indicators

Friday, September 20

  • No data

Earnings releases this week

  • No real estate–related earnings

Implications for mortgage REITs

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Needless to say, the REITs will focus almost exclusively on the FOMC meeting. After not mattering for quite some time, inflation numbers are now relevant as far as Fed policy goes. REITs like American Capital Agency (AGNC) or Annaly (NLY) will focus on the consumer price index. If the Fed starts seeing some inflation, it will not only breathe a sigh of relief, but it will also probably accelerate the unwinding of quantitative easing. If the inflation numbers remain subdued, the Fed will probably want to keep the pedal to the metal.

Implications for homebuilders

Homebuilder earnings are largely done. That said, there’s a lot of economic data of interest to builders like Lennar (LEN), Standard Pacific (SPF), and KB Home (KBH) this week. Housing starts and building permits will be the biggest numbers to them, although the industrial numbers released on Monday will be of interest. The builders are probably not all that sensitive to quantitative easing, but they will take a close look at any changes to the Fed’s economic forecasts. Builders are highly cyclical stocks, and signs of economic weakness are negative for them.

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