Daily Bullets.......For May 1, 2014

·         “The homeownership society is clearly over”…. A new report by U.S. Census shows homeownership fell to below 65% for the first time since 1995. It also reports there has been a slight shift in ownership to a larger institutional component.

       What’s the point? Wow, don’t you just love the media’s sweeping generalizations? No question that the aftermath of the real estate bubble has created distortions in the market which are still with us; however, we do not believe the desire for home ownership in the U.S. has changed. With improving job growth, we expect demand for housing and homeownership rates should improve. And a sweeping headline like the one above increases the likelihood homeownership rate is bottoming. Link: http://realestate.msn.com/blogs/post--why-homeownership-is-at-a-19-year-low

 

·         20% correction?..........Yahoo Finance has a front page attention-grabbing article this morning calling for a 20% market correction. The reason? A technical analyst’s opinion that the stock market is tracing a formation similar to the April-May 2011 top.

       What’s the point? We have said many times, market corrections are inevitable, normal and, in many cases, healthy. Should we worry about corrections? As financial planners, we need to understand and be aware of “the market”, but we believe fundamentals are the ultimate driver of stock prices and fundamentals remain generally positive. Furthermore, we advocate diversification as a critical component in wealth management. Diversification helps to reduce portfolio volatility and provide downside protection during market corrections. Link: http://finance.yahoo.com/blogs/talking-numbers/this-chart-says-we-re-in-for-a-20--correction-145953185.html

 

·         Consumer coming through……In another positive for the economy, consumer spending in March accelerated at its fastest pace in 4.5 years, rising at a real rate 0.7%, up from 0.4% in February.

       What’s the point? Consumer spending makes up over two-thirds of the economy. Recent data showing acceleration in consumer spending is positive for the economy and further supports our belief that economic growth should accelerate in 2014. This appears to be occurring and if stronger job growth can be sustained, which we expect, this bodes well for further acceleration in economic growth. This, in turn, is positive for corporate profit growth. One risk? Investor concerns that the Fed may have to accelerate its monetary tightening process, which could be jolt to the market. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140501&id=17570509