Mortgage rates are too high to move. Here are four stocks that benefit, according to a money manager.

It shows the huge gap between mortgage rates, and the rates that Americans are actually paying — a gap that hasn’t been this wide since the early 1980s, back when mortgage rates reached as high as 18%. At the end of 2022, the effective mortgage rate was just 3.48%, so no one is going to want to pay 6.5% if they can avoid it. And, they aren’t, with mortgage application demand down about 30% from a year ago.

Milwaukee-based Fiduciary Management, which manages about $14 billion in assets, makes that point in its review of the first quarter. The firm says it’s “particularly attracted” to the repair and remodel market.

Homeowners have strong balance sheets and built up significant equity as home prices have appreciated. Low ticket R&R, it says, has historically been resilient during periods of economic weakness. And there’s a need to remodel, given the median age of an occupied home being around 40 years. Plus, as seen in the chart above, locked-in mortgages as well as limited home supply have discouraged moving — likely leading homeowners to invest more in their current homes.

The firm notes the dynamics in the U.K. are similar, with an even older housing stock (70 year), a constrained supply of new homes, an aging population and people staying in their homes longer.

So which companies benefit? It’s previously highlighted three — Simpson Manufacturing SSD, +1.55%, which makes wood and concrete construction products; Ferguson FERG, +0.65%, the world’s largest distributor of plumbing and heating products to trade professionals; and Howden Joinery Group HWDN, -1.49%, the U.K.’s largest supplier of fitted kitchens. In the fourth quarter, it bought Fortune Brands FBIN, +3.26%, which has a portfolio of branded building products including Moen and Master Lock, and which the money manager says trades at only 14 times estimated 2024 earnings. R&R accounts for more than two-thirds of Fortune Brands’ revenue.

The markets

U.S. stock futures ES00, +0.15% NQ00, -0.04% nudged higher ahead of the release of the latest inflation data. The Russell 2000 RUT, +0.80% will be in the spotlight after two straight banner days for the small-cap index.

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The buzz

Consumer price index data is due to land at 8:30 a.m. Eastern, with expectations that the year-over-year rate will slow to 5.1% in March from 6%, while the core is expected to tick higher to 5.6% from 5.5%.

“Markets will interpret a downside surprise as allowing the Fed to prioritize bank stability through at least a May rate pause, whereas an upside surprise will firm a 25bp hike from the current 75% probability,” says Will Compernolle, macro strategist at FHN Financial. “An as-expected report will lead to a modest bond rally as markets breathe a sigh of relief from avoiding a worse outcome.”

Besides the CPI data, there’s also the Fed minutes due for release, at 2 p.m.

On the sidelines of the spring meetings of the International Monetary Fund and the World Bank, finance ministers from the Group of 7 nations will assess their efforts to help Ukraine and sanction Russia.

Berkshire Hathaway BRK.B, +0.35% CEO Warren Buffett is due to be interviewed by CNBC from Japan, where he told the Nikkei newspaper that he had increased the company’s stakes in five trading houses.

Emerson Electric EMR, -0.01% is in advanced talks to buy National Instruments NATI, +0.21% for about $60 a share, Bloomberg reported, citing people familiar with the matter. Fortive FTV, +0.11% also had been bidding for National Instruments, the report said.

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