As the stock market steadily climbs higher (Dow 20,000 is just over 10% away) and the Wall Street professionals are still counting their 2014 bonuses, what’s in it for Main Street? Since the bubble burst in 2008, Obama made the rich richer, but what about middle America? Is it finally their turn…?
These 2 charts should tell us the answer…
Middle America was traumatized regarding real estate and the stock market in 2008, and it’s taken a while for them to feel safe again. But if there’s one thing you can count on with the masses in investing, it’s having memory loss. 2008 is now 7 years ago, and in investing terms, that’s long enough for people to forget.
Here’s the chart I commented on to you a while ago- it’s an index of homebuilders, and this should give us a clue about how lively the housing market is:
This is a bullish chart. After a long run up in 2012 and half of 2013, the homebuilders leveled off. And in summer 2014 they were looking as though they might break down- I warned you of this back then. When a chart levels off after a long run up like that, it’s common for it to break down and renew the cycle with a down phase. But every so often they do the opposite: they instead turn upwards to begin a new up phase into new price territory.
This chart is telling us that housing is heading into a new upsurge in prices. Main Street may soon be clear of the 2008 losses and will feel the ‘wealth effect’ again.
And if that wasn’t enough to stave off the risk of a recession for now, look at the retailers:
A similar chart to the homebuilders: a break upwards into new territory after choosing not to head south.
Everyone has been expecting a recession. The stock market is contradicting this.
Always remember two things:
So there are another 2 reasons why the chances of recession just decreased.
Best
Jim.
The author has an interest in the securities discussed in this article. Source of charts: stockcharts.com
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