(New York)

Everyone know the housing market is facing some headwinds. Strong home price growth combined with higher rates is hurting demand. Accordingly, sales and new activity have been falling since the late spring. However, new data shows that home prices seem to have already entered a cyclical downturn that is only going to intensify. A combination of low affordability, slowing demand, and higher rates have conspired to bring down home prices, and it does not look like things will turn around quickly. The Fed is already warning about real estate being a “downside risk” for the economy.

FINSUM: The whole housing market seems to be slowly, but surely, stalling. Homebuilder stocks have been hammered, prices are falling, and rates are rising. It seems like we are in for a downturn.

(Rome)

Italy looks like it is in bad shape. It is openly defying the EU’s budget rules by running an excessive deficit, and what’s worse, it looks likely to be downgraded to junk status by ratings agencies. Moody’s already downgraded the country to Baa3, its lowest investment grade rating and just one rung above junk status. Yields have been swinging wildly on the country’s bonds as a result.

FINSUM: We are quite worried about the implications if Italy gets downgraded to junk, as it could mean lots of funds need to sell the bonds because of their mandates. What kind of sell-off could that spark?

(New York)

Monday seemed like it was going to be a good day. Chinese stocks surged mightily, which pushed up US equities ahead of the market opening. However, things quickly turned into a rout, with the Dow and S&P 500 getting wounded badly. Everything from worries over the trade war, to Italy’s budget, to Saudi Arabia are weighing on the market right now. Solid earnings are helping prop the market up, but markets are still down strongly in pre-market trading today.

FINSUM: Many investors are starting to ask themselves if this bull market has finally peaked. We think it is a smart question. That said, as long as economic performance continues strongly, we have a hard time imagining the market will fall too steeply.

(Seattle)

The hype over Amazon’s pending second headquarters is making quite a splash, and not just at the local level or in the media. Several investment funds, large and small, are or will deploy significant capital in trying to chase the real estate returns that seem likely to accompany the new location. Amazon says the new headquarters will employ 50,000 people over the next two decades, and existing tech-focused cities have seen huge gains in real estate on the back of the highly paid work force. Accordingly, several funds are being established to quickly buy real estate in the city that wins the new headquarters.

FINSUM: Buying real estate in the winning city seems like a very good long-term bet. We wonder how locals in these “finalist” cities are feeling given the upside and downside of Amazon coming.

(New York)

The stock market has been given a lot of time to adjust to the midterm elections and their likely outcome. Most think Democrats will take back the House, while Republicans will hold the Senate. So what is the market saying about how different sectors will perform in that scenario? The answer is that stocks in the defense and infrastructure space are doing well, as most don’t see a fiscal tightening. Infrastructure spending is also seen as a bipartisan issue. Pharmaceutical companies are also benefitting as a split congress would be less likely to pass legislation to lower drug prices. Stocks impacted by trade tensions have continued to suffer as no one sees a bright outcome on that front.

FINSUM: So the market’s assumption are showing through, but that heightens the risk of what happens if the election does not go to plan. For instance, what happens to pharma prices if the Democrats sweep?