Walmart, with lots of anxiety pre-priced, had a wonderful relief rally of 5%.
While the SP500 rose 0.2%, the Nasdaq fell 0.2%?
Quite a mixed day really, and no wonder with that housing data?
US Housing Starts collapsed another 9.6%. As that property bubble, I have been warning of for the past year, yes, the risk of another GFC-styled housing crisis, begins to burst.
Watch out for the current extreme pricing gains to reverse somewhat sharply in the next few months. The housing construction industry is already in recession.
The previous near-zero Fed Fund Rate was held for far too long and encouraged riskier than usual activity across all markets. From the extremes of crypto, through equities, and to the relatively usually conservative housing market.
The GFC taught people that property can go down, but people also took away that you always keep buying regardless. That euphoria, which partied hard on low mortgage rates, is well and truly over.
The rich with deep pockets may well keep buying for a little longer, but new homes, construction and the bulk of the property market are all rolling over already.
In line with manufacturing and plummeting consumer sentiment. Yes, consumer sentiment bounced last week but remains at historic lows since 1950.
Anyone buying property in the US at the moment, risks doing so at the very top, with the downside for prices the likely trend over the next 1-2 years. If the recent euphoria mentality is anything to go by, US property could fall 10% to 20% during this period.
For the global economy and equity market outlook, consider the prospect of simultaneous property cases in both of the world’s two largest economies, China and the USA.
China knows it is happening. The USA has not figured it out yet?
Aggressive Fed rate hikes, combined with high inflation and a slowing economy could well add up to a ‘property crash’.
Then add the energy recession in Europe. The Zew business climate index is already at a record low, and just hit a new record low.
Caution on property and equity portfolios has never been a more obvious necessity.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
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