Morning Report: Goldman sees 3.7% unemployment in 2018

Vital Statistics:

	Last	Change
S&P Futures	2576.3	0.0
Eurostoxx Index	385.1	1.3
Oil (WTI)	56.3	-0.3
US dollar index	87.2	0.1
10 Year Govt Bond Yield	2.34%
Current Coupon Fannie Mae TBA	102.651
Current Coupon Ginnie Mae TBA	103.494
30 Year Fixed Rate Mortgage	3.9

Stocks are flat this morning on no real news. Bonds and MBS are flat as well. 

Slow news day. 

This week should be relatively quiet with the Thanksgiving holiday. There won't be any market-moving economic releases, and the only thing out of the Fed will be the minutes from the November meeting on Wednesday. 

The Index of Leading Economic Indicators came in at 1.2%, doubling the Street estimate of 0.6%. 

Goldman is extremely bullish on 2018, as they see the job market getting even tighter and wage growth accelerating. They see the unemployment rate falling to 3.7% in 2018, and to 3.5% in 2019. They are forecasting 4 rate hikes as well, which is well above what the Fed Funds futures are predicting. The Fed Funds futures are pricing in between 1 and 2 hikes in 2018 (assuming that December is a given). 

More than half the refis in October were FHA / VA loans. This is due as much to home price appreciation as interest rates. Borrowers can save money by refinancing into a conventional loan once they have 20% equity. Loan officers, take a look at the FHA loans you did a few years ago and look for opportunities. 

Tax reform is scheduled for an 11/30 vote in the Senate, as Congress takes this week off. The upper middle class is probably going to benefit the least from tax reform, and Republicans are going to test the theory that they are indeed the third rail in US politics. The upper middle class consists of what demographers call the HENRYs (high income, not rich yet), who may appear to be rich according to the numbers, but often live in high cost areas and have lifestyles more similar to the middle class than the rich. We could see home price appreciation begin to moderate in some of the suburbs around DC and NYC. It probably won't affect California as much, as the CA real estate market inhabits its own universe.