·
Slowing home prices a good thing……S&P Case Shiller 20-city home price index
increased by “only” 9.3% in May, a slowdown from prior 4-5 months and
considered worrisome by some.
What’s the
point? There is a lot of news in the
market today about the home price index. A 9% increase y/y is considered a
“concern” because it’s a “slowdown”. Put in perspective, a 9% y/y increase is
about 3x the long-term average for house price increases, which have run pretty
close to inflation over the long term. It
should be no surprise why the housing recovery has been uneven: this economic
recovery has been slower than any recovery in post WW2 era; wage growth has
been restrained; and a younger demographic (millennials) has not been enamored
with or financially able to buy a home. A
slowing in house price gains should be considered a good thing because it
should help to improve housing affordability. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140729&id=17814629
·
Consumer confidence highest in seven y ears….Conference Board consumer confidence index rose again
to a pretty strong 90.9 in July vs 86 in June. This is the third consecutive
increase in the index.
What’s the
point? Rising consumer confidence is
a good leading and coincident indicator for the U.S. economy. We believe it
reflects acceleration in job growth. This is further support for our belief
that economic growth should accelerate and places the U.S. economy on a path
for continued growth. This also has positive implications for many sectors of
the economy and earnings for companies in those sectors. As corporate earnings
are the primary driver of stock prices, this has further positive implications
for stock prices. Despite the numerous technical indicators that are flashing
warning signs, underlying economic fundamentals, at least in the U.S., continue
to remain positive for stocks. One key risk would be a potential for economic
growth to accelerate too fast, causing an unexpected rise in interest rates.
The 10-year Treasury bill yield of 2.47% is still telling us that investors
believe excessive growth and inflation are not yet a problem. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140729&id=17814365\
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