- Home prices in 20 major U.S. metropolitan areas grew 10.4% in December
- Small cap value stocks have returned 15.2% year-to-date through February
- The Federal Reserve’s current target range for the federal-funds rate is 0%-0.25%
Top Three Market Headlines
U.S. Home Prices Accelerate: Home prices across 20 major U.S. metropolitan areas surged 10.4% in December 2020 from the previous year, according to the S&P Core Logic Case-Shiller Home Prices Indices released last week. The increase followed a 9.5% rise in the month of November and was the highest annual growth rate seen in six years. The strong recent gains have been keyed by a surge in demand, as consumers take advantage of record-low mortgage rates, combined with limited supply, as the number of homes for sale dropped 23% in December from the previous year. Phoenix, Seattle, and San Diego saw the strongest price gains among the 19 cities surveyed.
Value Stocks Start Strong in 2021: After a decade of trailing their growth-oriented peers, value stocks have taken center stage in 2021. Year-to-date through February, the Russell 1000 Value index returned 5.1%, beating the -0.8% return of the Russell 1000 Growth index. The resurgence has been especially pronounced among small cap stocks, where the Russell 2000 Value index’s year-to-date gain of 15.2% has easily surpassed the 8.3% return of its growth counterpart. Economically-sensitive sectors such as financials, consumer discretionary, and industrials, which are more heavily weighted in value indices, have particularly benefited in 2021 as reopening optimism has boosted inflation expectations and interest rates.
Federal Reserve to Maintain Easy Monetary Policies: Federal Reserve Chairman Jerome Powell reiterated in Congressional testimony last week that the central bank intends to maintain its expansionary monetary policy—highlighted by near-zero short-term interest rates and an aggressive asset purchase program—until the labor market is close to full employment and inflation has hit the Fed’s 2% target. While acknowledging that the economic outlook has continued to improve since the end of 2020, Mr. Powell said the Fed is looking for “actual progress, not forecast progress” towards its employment and inflation goals.