US investors and market participants learned so much from 2008 Financial crisis when equity market sunk deep and recession sat in briefly. This time when Covid-19 pandemic hit, Fed ensured both markets as early as March 2020, equity market and consumer spending remain working, so that when economic activity regains, market will recover fast at its full length.
Now, September 2020 we have some data available showing what people have done during the lock-down. According to the earnings report in August 18, Home Depot had its highest revenue growth, 23% up from the last year, in its last 20-year-business history (Grossman, 2020, Aug 18). Likewise, O’Railly, auto parts retailer also outperformed its analysts estimate, showing that consumers spent time to repair and maintain their cars home (Lee, 2020, July 30). Similarly, US consumers have bought many DYI items from Etsy, Michaels, and Shopify to spend time home productively.
What is the difference between 08 and 2020? In 2008, housing markets were overvalued, and mortgage securities were dysfunctional. In 2020, housing markets are not causing the problems. By contrast, governments asked consumers to stay home. Actually, as the previous article mentioned, more people even bought houses.
Wait! We did see this movie before. Even after the deepest troubled era, essentially, 2013 mortgage insurance companies, Essent Group, Radian Group, MGIC, and NMI Holdings, bounced back, their shares are up 62% in 2013 (Scism & Timiraos, 2013, September 18).
Then, mortgage insurance companies should be in better place than now, in that housing markets are considerably healthy.
Rachel Kim (2020, September 19). Mortgage Insurance Companies Bounced Back, The Blue Ocean Management, Retrieved from: https://theblueoceanmanagement.com/category/theblueoceanmanagement-com/market-trend-foresight/housing-market/
Grossman, 2020, Aug 18, Wall Street Journal
Lee, 2020, July 30, Wall Street Journal
Scism & Timiraos, 2013, September 18, Wall Street Journal