Week in review

The week after the jobs report usually has very little important economic data, and last week was no exception. After the blowout jobs report, bonds sold off and stocks fell as people feared the Fed. Probably the most important data point last week was retail sales, which came in lower than expectations. Retail sales have become more difficult to measure as many small online retailers do not report data to the federal government.

Will the Attacks in Paris Lead Investors to the Safety of Bonds?

Last week brought us some additional jobs data, with the JOLTs jobs report coming in close to a 15-year high. The National Federation of Independent Business put out its sentiment index, and low quality of labor has replaced weak sales as the third largest problem for small business (taxes and regulation are the two biggest hurdles).

Implications for mortgage REITs

Bond yields fell 6 basis points last week after spiking on the jobs report. The events in Paris over the weekend should lead to a flight to quality, which would lower interest rates. This is good news for mortgage REITs such as American Capital Agency (AGNC).

Investors interested in making directional bets on interest rates can look at the iShares 20+ Year Treasury Bond ETF (TLT). Those interested in trading in the mortgage REIT sector through an ETF can look at the iShares Mortgage Real Estate Capped ETF (REM).

Implications for homebuilders

Homebuilder sentiment is at an all-time high, but we have yet to see much evidence of building. Builders are blaming the lack of available land and a tight market for skilled labor. That said, D.R. Horton (DHI) announced good numbers last week, and Toll Brothers (TOL) took up its guidance. You can invest in homebuilders through the SPDR S&P Homebuilders ETF (XHB).

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