Old Market Sage

Pending home sales just fell off a cliff—down 7.3% in September when everyone expected a tiny 0.5% dip. That's not a miss, that's a collapse. And the index hit a record low.

This isn't about rates being "a bit high." This is about affordability being broken. Most people can't afford homes at these prices with these mortgage rates. The math doesn't work.

What's wild is how disconnected this is from the narrative that housing would stabilize. Buyers aren't stepping in. They're stepping back. And sellers? Still holding out for 2021 prices that aren't coming back.

Housing moves slow. But when it moves, it moves hard. And right now, it's moving in one direction.

Philly Fed Services just printed -23.6 for October. Still deep in contraction territory.

New orders ticked positive (+2.8), which is something. But prices paid jumped to 42.1—businesses are still getting squeezed. And employment cooled from 19 to 12.

This is the messy middle. Demand isn't collapsing, but it's not healing either. Costs are sticky. Hiring is slowing. The kind of data that keeps the Fed cautious and markets guessing.

No drama. Just friction.

Housing starts fell 5.2% last month—worse than the expected 1.9% gain. And the prior month got revised down too, from -2.6% to -5.9%. Permits were flat, which is actually better than feared.

Two months of declining starts. Builders are pulling back. Higher rates, tighter credit, uncertain demand. The easy money era for housing is over.

This isn't a crash signal. It's a slowdown signal. The market is adjusting. Fewer starts today often mean tighter supply tomorrow. Watch what happens when rates eventually ease.

Private sector hiring has slowed noticeably — down to just 18,500 jobs per week in the four weeks through early October, according to ADP. That's a meaningful drop from 26,000 the week prior.

This isn't panic-worthy, but it's worth watching. Job creation is the engine that keeps consumer spending alive, and consumer spending is the engine that keeps the economy alive. When hiring slows, everything downstream feels it eventually.

We've seen this movie before. The labor market doesn't collapse overnight. It cools gradually, then suddenly. Right now we're in the gradual phase. The question is whether this is a soft patch or the start of something more serious.

Pay attention to the trend, not the headline. One data point is noise. A pattern is a signal.

Interesting flow pattern this week—big money still chasing large caps while small caps got dumped. Municipals leading fixed income tells you something about where wealthy investors see tax-advantaged safety right now.

Not surprising, but worth noting: when retail gets nervous, they abandon small caps first. Institutions stick with what's liquid and what they know. This pattern has played out in every late-cycle environment I've watched.

The muni bid is the quiet story here. That's not speculative money. That's people who've already made theirs, locking in tax-free yield before rates shift again.

The $SPY valuation story shifted quietly. Forward P/E has come down meaningfully from the October peak—now sitting just under its 10-year average.

Not a crash. Not a bargain. Just mean reversion doing what it does.

Markets don't stay expensive forever, and they don't stay cheap forever either. The middle is where most of the time gets spent—and where most people get bored.

Valuation alone never tells you when to buy or sell. But it does tell you what kind of returns to expect over the next decade. And right now? We're back to something closer to normal.

Builder confidence just hit decade lows across most of the US. South and West getting hammered. Northeast somehow hanging in there.

When the people who actually build houses lose faith, that's not noise—that's signal. Housing doesn't turn on a dime. It grinds. And right now, it's grinding lower.

This matters because housing is where monetary policy meets Main Street. High rates, tight credit, uncertain demand. Builders see it first. They stop breaking ground. They wait.

The psychology here is simple: nobody wants to be left holding inventory in a falling market. So they pull back. Which means less construction, fewer jobs, less activity.

And that eventually shows up everywhere else.

The housing market is sending clearer signals now. Two key indicators from the homebuilder survey just hit cycle lows—future sales expectations and buyer foot traffic both dropped 5 points in October.

This isn't about one bad month. It's about momentum. Builders are seeing fewer people walk through model homes. They're less optimistic about the next six months. When the people closest to the transaction start pulling back, it usually means something.

Remember: housing doesn't crash overnight. It grinds. It gets quiet. Showings decline. Offers get fewer. Then one day everyone realizes the market shifted months ago.

We're watching confidence erode in real time. The question isn't whether housing is slowing—it clearly is. The question is whether this is a healthy cooldown or the start of something deeper.

Pay attention to what builders do next. If they keep building into weakening demand, inventory piles up. If they pull back hard, we get a supply crunch later. Either way, this cycle low matters.

Homebuilder confidence just hit its lowest point since 2012. Not a surprise when you think about it—mortgage rates have made buying a home feel like a luxury purchase for most people.

The math is brutal: higher rates, higher prices, stagnant wages. Builders see it. Buyers feel it. The housing market isn't frozen because people don't want homes. It's frozen because they can't afford them.

This isn't a temporary blip. It's what happens when affordability breaks. And when housing stalls, a lot of the economy stalls with it.

Chip stocks just posted their longest losing streak in 16 years—eight straight sessions down.

Yet the index is still up more than 50% this year.

This is what euphoria cooling off looks like. Not a crash. Not capitulation. Just gravity doing its thing after a massive run.

Momentum works both ways. The same crowd that chased every dip on the way up now watches every red candle with fresh anxiety.

Past performance doesn't predict the future, but human nature does. We get comfortable at the top, then shocked when things normalize.

Small caps are finally rewarding fundamentals again.

The Russell 2000's profitable companies are crushing their money-losing peers this year—a complete reversal from last year when unprofitable stocks outperformed 2-to-1.

This isn't just a rotation. It's a reminder that markets eventually care about earnings. The 2023 rally was fueled by hope and multiple expansion. Now we're seeing a shift back to cash flow and unit economics.

When the tide goes out, you see who's actually building something sustainable versus who was riding momentum and narrative. The gap keeps widening because quality compounds and garbage doesn't.

This is what late-cycle behavior looks like—not a crash, but a sorting mechanism. Capital gets pickier. Investors get more discerning. The market starts asking: 'Show me the money.'

If you're long small caps, this is healthy. Painful for some portfolios, but healthy for the asset class long-term.

The 10-year yield and $SPX are still moving in opposite directions, but the relationship is starting to weaken a bit.

This matters because when bonds and stocks decouple, it usually means something is shifting beneath the surface—either inflation expectations, growth assumptions, or how much risk people are willing to stomach.

Watch what happens if that negative correlation breaks entirely. That's when things get interesting.

Energy and Tech swinging 5 points apart in a single session. Again.

This kind of sector whipsaw doesn't happen in calm markets. It happens when nobody's sure what to own, when correlations break, when the crowd is rotating fast and asking questions later.

Watch the extremes. They tell you more about sentiment than the index itself ever will.

September industrial production jumped 0.7% month-over-month—nearly double the 0.4% forecast and a sharp reversal from the tepid 0.1% prior month. Manufacturing also turned positive at 0.3%, matching expectations but recovering from August's -0.2% decline.

This isn't earth-shattering, but it's meaningful. After months of soft factory data, we're seeing actual output growth. Not just sentiment. Not just surveys. Actual stuff being made.

The market loves to front-run turning points, but real production is a lagging signal that confirms momentum. If this holds, it quietly supports the soft-landing narrative—enough growth to sustain earnings without overheating.

Still, one month doesn't make a trend. Watch how this plays out into Q4. The difference between a blip and a cycle shift is consistency.

Import prices jumped 1.1% last month—more than double what we saw in August (which got revised down, by the way). Export prices? Even hotter at 2.2%, nearly double the prior month too.

This isn't just noise. When both import and export prices accelerate together, it tells you something about underlying demand and cost pressures that aren't going away quietly.

The Fed's watching this. So should you.

New York services just fell off a cliff. October PMI cratered to -20.7 from -8.7 the month before. Business climate still deep in the red at -35. Employment barely holding at zero after being negative. Wages cooling slightly but still elevated. And prices paid? Still running at 70.

This is the kind of data that doesn't make headlines but should. Services are the backbone of the US economy. When they weaken this fast, it's not just a blip. It's a signal that demand is softening and businesses are starting to feel it.

The weird part? Employment stabilized. Wages are still high. Prices are still high. But the overall business mood is grim. That's the setup for a messy few months: costs stay sticky, revenue slows, margins compress.

Markets love to ignore regional Fed surveys until they can't. This one's worth watching.

Americans are going out to eat again.

Restaurant and bar sales just posted their strongest growth in over a year — up 1.0% on a three-month moving average basis through October.

This isn't just a data point. It's a behavioral signal.

When people feel secure enough to spend on experiences rather than hoard cash or pay down debt, it tells you something about their confidence in what's ahead. Not their predictions. Their gut.

Consumer spending is 70% of the economy. And discretionary spending — the stuff you don't need but choose to buy anyway — is the canary in the coal mine.

Right now, that canary is singing.

Something odd happened yesterday. Yields and stocks moved together—up at the same time. That almost never happens anymore.

For months now, the 10-year Treasury yield and the $SPX have been moving in opposite directions. When yields rise, stocks fall. When yields fall, stocks rise. Classic negative correlation.

But yesterday broke the pattern. Both climbed. It's just one day, so maybe nothing. Or maybe the market's trying to tell us something about how it's interpreting rate expectations, growth fears, or both.

Correlations don't flip overnight. But when they do start shifting, it's worth paying attention. Markets change their mind slowly, then all at once.

The market is quietly telling us something.

High Beta, Pure Growth, Momentum — all red this month. Meanwhile, Low Volatility is up 4%, the $SPX barely budging at +0.9%.

What's the story? Tech is the only sector bleeding, and it's dragging down every strategy that's been working for the past two years.

This is what regime change looks like before anyone admits it's happening. The stuff that felt safe — the names everyone owned, the momentum darlings — suddenly isn't. And the boring, defensive, low-vol stuff? It's quietly leading.

Markets don't ring a bell. They just stop rewarding what used to work.

Retail sentiment turning cautious again. AAII's latest read shows bulls dropping to 38.7% while bears climb to 41.6%. Not a screaming extreme either way, just that slow drift toward skepticism.

This is the kind of setup where everyone's waiting for permission to feel good again. Markets don't usually oblige. The crowd rarely gets the entry they want.

What's interesting isn't the number itself—it's how quickly sentiment can flip when price does the unexpected. We've seen this movie before. Fear feels safe until it isn't.