Credit markets running hot

While the stock market tends to steal the headlines, and double-digit returns will do that, it is worth noting that demand for a quieter part of the market is running hot right now: corporate bonds. US investment-grade companies have raised roughly $150 billion of new debt in the first two weeks of January, and with ease. Meanwhile, global corporate bonds shows spreads, or the excess yield over government bonds, at the lowest level since 2007.

Investors are trying to decide if this enthusiasm signals confidence in the underlying economy or overexuberance in the face of continuing uncertainties around geopolitics, AI spending, and the future of Federal Reserve independence.

Housing data got a much-needed bump last week. December existing home sales increased 5% month-over-month (m/m) on a unit basis, while the median sales price increased 0.6%. The National Association of Realtors highlighted that December home sales, after adjusting for seasonal factors, were the strongest in nearly three years. We will see if this momentum continues in 2026. The housing market has been stuck in neutral for the past three years but steadily declining mortgage rates and a renewed push for affordability by President Trump could help break the market out of this rut.

Elsewhere in the economy, data released painted a steady picture. December inflation came in at 2.7% year-over-year, consistent with the prior growth rate and in line with economists’ expectations. Initial jobless claims remained low at 198,000 and supportive of the ongoing “low hire, low fire” regime. November retail sales, delayed by the government shutdown, rebounded to 0.6% m/m, after a decline in October.