Two of the biggest economic stories of 2020 have also been a significant trend over the past decade. The trend in mortgage rates and gas prices, and the impact on their respective markets have been eye opening, especially in the two charts we highlight below.
1. Mortgage Rates at Historical Lows leading to Record Mortgage Originations
Mortgage Rates have continued their descent with the 30 year mortgage rates hitting another historical low. There are a variety of factors contributing to this trend including large demographic changes and family formation in the U.S. coupled with record low interest rates globally. This has fueled a surge in mortgage originations and refinance opportunities due to record low interest rates creating cheap liquidity. At year-end, the 30 Year Mortgage Rate (Freddie Mac) was at 2.66% !!!
2. Gas Prices Flat over the last decade and Energy Stocks Lag Significantly
Gas Prices are practically unchanged over the last decade yet the Energy sector has also dramatically lagged the S&P 500. The top chart below is the US Retail Gas price which has fluctuated between a high of $4.018 /gallon and a low of $1.834/gallon over the last ten years. The Energy sector has seen a total price decline (including reinvested dividends) of -23.38% versus a gain in the S&P 500 of 263% over the same time period.