Later in the quarter, credit yields gave way to market pressures; however, despite the worst peak to trough market move in a decade, credit spreads remained within normal bounds and well below the scarier tumult of the winter of 2016.,For example, the low end of the housing market had been neglected by builders since the crisis; however, just this year, low-end jobs wage gains reached their highest level since the crisis.,Further, recent market activity has gone a long way towards correcting two of the big prongs impairing affordability: first, mortgage rates have come down considerably since peaking in early October, along with the 10-year yield; and, second, although housing markets correct more in terms of volume than price  the rise in price will be held in check by rising inventories, sluggish volumes and a down stock market.,Last year we said:

It is hard to sit in our seat today and say exactly which areas of the market would best withstand the next bear, for there are yet to be obvious areas of overinvestment like the technology sector in 2000 and the financials in 2007 that will lead the way down; however, we have confidence that the nature of the next recession (and let’s not forget, a recession is an inevitability eventually) will be different than the last.,To reiterate: “the 2007-09 bear market was an actual liquidity crisis where deflation was the risk that imperiled the economy, whereas the next recession will be a normal Fed induced recession when inflation gets too high and the Fed thus raises rates to cool things off. read more