Displaying items by tag: rates

Monday, 04 March 2019 13:57

Get Out of These Real Estate Stocks

(New York)

The real estate market has been heading south for almost a year. Disappointing numbers keep coming in, but there has not been major urgency or alarm. In fact, homebuilders are having a stellar year, up almost 20% and well above the S&P 500’s gain. However, Stephen Kim at Evercore is warning that investors should be wary of hosuing stocks. Citing the most risky names as DR Horton, PulteGroup, Toll Brothers, and KBHome, Kim says about the group that “Hope is not a strategy”. Kim was bullish on the shares in the Fall before their big move higher, but now believes they are fully valued.


FINSUM: The trend may be your friend, but given the direction of the housing market and the big recent price rises, we wouldn’t want to be long the homebuilders index right now.

Published in Eq: Real Estate
Wednesday, 27 February 2019 13:43

The Yield Curve is Shouting “Recession”

(New York)

Stock investors may have largely moved on from day to day concerns about a pending recession, but important parts of the bond market are still signaling a downturn is coming. For instance, the 1 to 5-year spread in Treasuries inverted at then end of December, and despite the Fed making a big policy u-turn, has remained inverted ever since. The spread is currently minus 7 basis points. It is important to remember that the entire yield curve does not invert at once, it happens in stages, and this particular measure has proven to be a good recession indicator in the past.


FINSUM: It is alarming to us that this remains inverted despite the drastic change at the Fed. From here forward we expect the curve to be very data dependent, as if economic data is worsening, we expect more and more of it to invert.

Published in Bonds: Total Market
Wednesday, 27 February 2019 13:42

Big Trouble in Real Estate

(New York)

Another month, anther patch of really rough data on the US real estate market. New data from December has just been released, and shows a clearly negative trend for the market. Housing starts dropped 11.2% in the month, and overall, the market saw the worst price growth (4.7% in major metropolitan areas) since 2014. Stock market turbulence and higher rates plagued the market at the end of 2018.


FINSUM: We have seen many months of deteriorating real estate performance. The big question now is whether the market can rebound in time for the peak spring selling season.

Published in Eq: Real Estate
Tuesday, 26 February 2019 12:31

The Huge Risk for Stocks

(New York)

Stocks are off to a very strong start this year, but it is hard to remember a time that they looked so vulnerable. Investors may be happy with the 10%+ gains in the S&P 500, but the reality is that stocks could nosedive at any moment. In a sign of how grave the risk is, we challenge you to ask yourself—what is a risk that could make stocks plunge 10% in a day? We are willing to bet 90% of you said “the Fed suddenly restarting hikes”. The core of this rally has largely been predicated on the Fed suddenly reversing course, letting investors breathe a sigh of relief that the central bank won’t hike the economy into recession.


FINSUM: The truth is that the Fed could reverse its position at any moment, which would probably cause a big downturn in markets. That said, we don’t think they will do anything so drastic.

Published in Eq: Total Market
Monday, 25 February 2019 12:09

The Big Recession is Coming

(New York)

Investors seem to have stopped worrying about it, but a recession is still in the cards. Ever since the Fed backed off, the market seems to have forgotten that we are likely at the very end of an economic cycle. However, most economists are differing from investors, as the majority are still calling for a recession by 2021. That is the view of over 75% of US business economists, with most still saying the Fed will continue hiking this year. 52% of those surveyed said a recession would start this year or next.


FINSUM: It is interesting to see how out-of-touch economists and investors are. A recession by 2021 sounds very reasonable to us, but the Fed continuing to hike this year does not.

Published in Eq: Total Market
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