Location Strategy Chartbook 01.11.25

WSJ: You may live hundreds or thousands of miles away, but the wildfires tearing across Los Angeles and other natural disasters stand to raise your home-insurance bill. The wildfires are estimated to have caused insured losses of as much as $20 billion or more. Hurricanes Milton and Helene inflicted insured losses approaching $50 billion. Insurers have tended to raise rates on homeowners in regions where disasters strike. But researchers say the scale of losses leads companies to tap faraway customers to recoup their money.

The Los Angeles wildfires are set to be the costliest blaze in U.S. history, analysts said on Thursday, in initial estimates of damage from the infernos.

CA Fair Plan, the insurer of last resort has $5.9B in exposure just in the Pacific Palisades

WSJ: The U.S. economy added 256,000 jobs last month and the unemployment rate edged down, the Labor Department said Friday. December’s gain in nonfarm payrolls was well above the 155,000 jobs that economists had expected, according to a Wall Street Journal survey.

The 4.1% unemployment rate was also better than the expected 4.2%. The results were the latest sign that the U.S. labor market has recovered from its midyear stumble and may even be gaining steam.

But Friday’s job report also shuts the door on a rate cut at the Federal Reserve’s next meeting, which is Jan. 28-29, and reduces the chances of a cut at its subsequent meeting in March. “The bottom line is the economy is in a good place. It’s growing very strongly. The labor market is at full employment,” said St. Louis Fed President Alberto Musalem in an interview Thursday. Looking ahead, the pace of rate reductions “has to be patient and careful and very dependent on the outlook.”

Outgoing US Treasury Secretary Janet Yellen, in one of her final press appearances, on Wednesday highlighted the need to avoid fiscal tightening as a forced response to some sort of financial-market disruption.

“I would hate to see it come to the bond vigilantes,” she said in a CNBC interview — referring to investors who demand more to buy government debt thanks to their perceived budgetary indiscipline. “Investors around the globe count on the US to be responsible in managing its fiscal policy, and not to rely on market responses to produce deficit reduction.”

Prices will be heavily influenced by the rate of production in non-OPEC countries and potentially by geopolitical factors — including sanctions and tariffs, according to Daan Struyven, co-head of global commodities research and head of oil research. Oil producers have high spare capacity, which may limit an increase in prices. Meanwhile, the price elasticities of OPEC and shale supply, which can be increased and decreased to counteract swings in energy prices, are expected to limit the risk of a significant drop in the oil price.

“Looking further, we expect oil demand to grow for another decade,” Struyven writes in the team's report. Emerging market demand for energy will rise as those economies expand. At the same time, there are still challenges when it comes to decarbonizing air travel and petrochemical products.

2024 was a solid year for consumers and they finished the year strong, with December card spending per household up 2.2% year-over-year (YoY), according to Bank of America aggregated credit and debit card data. Seasonally-adjusted card spending per household rose 0.7% month-over-month

Looking across income cohorts, higher-income households’ card spending in December continued to grow at a faster rate than that of their middle- and lower-income counterparts, though the recent relative recovery in lower- and middle-income households’ spending means the difference is small.

A major factor in consumer spending is the strength of the labor market. After-tax wage growth, based on Bank of America deposit data was 3% YoY last month across all income cohorts, with a broad-based uptick in growth

Highest mortgage rates since May 30, 2024

The average 30-year fixed mortgage rate Friday: 7.24%

Same day last year: 6.78%

10 Year Treasury yield today: 4.75% Spread today: 249 bps