Housing starts in December were gangbusters, then job openings face planted when they reported shortly thereafter. Both were outliers, but housing starts fed into the price softness that started last night after the Treasury’s kinda mysterious press release introducing the return of the 20-yr bond sale in the first half of this year. “Kinda” because it wasn’t clear why the widely expected announcement couldn’t wait until the quarterly refunding in several weeks. The reaction to the 20-yr is obvious on the 10s/30s curve chart on the second page. The week concludes with slowing volume. Next week brings little in the way of US data and silence from the Fed during the pre-meeting blackout. Inflation Lab burrows into the slowdown in core CPI to end 2019, finding a mix of factors but the same broad conclusion for the entire year. That is, segments where prices are growing faster than average are not forcing other sectors to raise prices too. It’s not surprising the Fed is failing to forecast inflation’s direction correctly. There really isn’t one direction to forecast. Rather, there are at least three. Thanks to all who participated in this week’s 2020 Outlook Webinar, whether live on Tuesday or by replay. A two-page synopsis with several updated charts starts on page 9. Last, a look back at cumulative returns over the last 8 years. The picture that develops is one of US strength despite a two-year period of rising rates, while the rest of the world languished despite rates much lower than those here. The argument that financial asset prices respond solely to Fed easing or tightening simply is not supported by performance analysis. Commodity prices, as a prominent example, defy any link to either GDP growth or easy money. Likewise, credit is too strong from 2012-2019 to merely be a “reach for yield” because the Fed kept rates too low. Detailed tables summarizing the major asset groups conclude the section. FHN Financial’s Mortgage Strategy Group published its 2020 outlook this morning.