Here is an update on used car sales, rent prices, central banks and a trade deal.
Trade Deal
May 8 (King World News) – Peter Boockvar: The announced US/UK trade deal today will be a good test case for all the other deals in terms of the scope and breadth of it. Are there going to be widespread declines in trade barriers and tariffs, the hoped for goal? Will this be a narrow deal instead with a few things here and there? Will the 10% baseline tariff on the UK, along with everyone else, still remain?
Bank of England Cuts
The Bank of England cut rates by 25 bps as expected to 4.25% in a 5-4 vote where two wanted a cut of 50 bps and two preferred no change. Their committee continues to be an interesting mix of opinions/dissents unlike the Fed which tends to coalesce around a consensus most of the time. They said “There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilized longer-term inflation expectations…Progress on disinflation in domestic price and wage pressures is generally continuing.”
What happens next? They set out two possible scenarios where in light of the global trade situation it could lead to either higher prices due to the weaker supply of things or on the other hand, demand falters more than supply does and prices fall. Thus, “Monetary policy is not on a pre-set path.”
In response to the non-committal on what happens next, the pound went from red to green vs the US dollar, gilt yields went from slightly down to now up while the FTSE 100 is off its highs.
With respect to rate cut odds post the FOMC statement and Powell presser which went as a neutral stance as I suspected it would go, there is still almost a 100% chance of 3 rate cuts priced in this year.
The Swedish Riksbank and the Norges Bank each kept their policy rates unchanged as expected.
Big 7 Stocks Have Entered Bear Market
Something I expressed in early February after the DeepSeek news, I’ll argue again on the heels of the Google story yesterday that the S&P 500 has lost the Big 7 stocks as the leadership group and it could be lost forever after an historic, incredible run. More challenging fundamentals and heady valuations/market caps that pulled forward a lot of future returns along with a world that overloaded on them are the main reasons. Whose hands the baton will eventually end up in remains to be seen but there is finally an opportunity to find other things to buy that could work as opposed to just anything related to AI. International markets have plenty of opportunities in addition to value stocks with good, boring businesses in the US.
Used Car Sales Surge
Spurred on by the rush to buy new vehicles ahead of tariffs which in turn drove some to buy used vehicles instead led the Manheim wholesale used vehicle index to rise 2.7% m/o/m in April and 4.9% y/o/y on a seasonally adjusted basis. Manheim said “The ‘spring bounce’ normally ends the 2nd week of April, but this year, wholesale appreciation trends continued for the entire month and were much stronger than we typically observe. We expected to see strong price appreciation in response to the tariffs, and that’s exactly what came. Weekly trends showed higher values as we moved through the month, but those increases tapered off each successive week. Used retail sales remain stronger than normal, and wholesale days’ supply is a bit tighter, so we will likely see less depreciation than normal over Q2.”
Of course in question is the sustainability of the price gains after the pull forward tires out. And we know vehicles, both new and used, are a key component of the core goods portion of CPI.
Staying on the inflation theme post Fed, I finally went through some multi family REIT conference calls to hear from them what is going on with rent trends, both for new and renewals.
Rent Prices Across The Country
From Camden Property Trust, whose portfolio is mostly in sunbelt states where the most supply has come online, a stock we own and run by one of my favorite management teams:
“New supply has peaked in our markets and apartment absorption continues to be strong. In fact, new starts are at a 13 yr low and are down 80% in Austin and between 65% and 80% in Houston, Denver, Charlotte, Raleigh, Atlanta, Nashville, and Washington, DC.”
By the way, they said they’ve seen no DOGE impact on their DC occupancy and rents.
“Rent affordability continues to be a tailwind with wage growth outpacing rent growth by over 300 bps for the past 28 months. The premium to own versus rent continues to be at historically high levels, making apartment homes more affordable.”
On the pricing side in Q1, effective new leases were down by 3.1% y/o/y while renewal rates were higher by 3.3% “for a blended rate of negative .1%.” In the prior quarter it was down 1.1% and they believe that the current quarter will be slightly better than the one just reported. “Renewal offers from May, June and July were sent out with an average increase of 4.2%.”
I will repeat my point that we should enjoy the current slowdown in rent growth because by next year and in 2027, rents are going straight up again because of the lack of new multi family supply going forward. Camden’s belief on this, “we’re underwriting with a view that rents are going to be flatish for this year. And then they’re going to start to rise next year at probably better than normal rates. And then within, in ’27, ’28, we’re going to have outsized revenue growth.”
Uber Customers Still Eating Out At Nice Restaurants
From Uber: They saw “a bit more growth internationally than the US, especially in the travel sector that affected overall price/mix.” And specifically with the US “that’s a bit due to that lower inbound US travel, which comes with lower gross bookings per trip.”
On the other hand, “We’re not seeing trade downs in terms of the kinds of restaurants that our eaters are eating at…And remember, the categories that we operate in, these are restaurants, transportation, grocery, tend to be categories that are quite consistent even during periods of macro uncertainty.”
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