If you’re waiting for house prices to get cheaper…
You’ll have to wait a bit longer.
According to a report in today’s Financial Times, the recent downturn is over.
Not just in the U.S., but elsewhere around the world too.
Of course, that’s no surprise to colleague, Phil Anderson.
While most folks crowed in 2022 and 2023 about an impending recession, Phil said there wasn’t a chance of that happening.
Not this year anyway… and probably not next year either.
Turns out Phil was dead right. He even backed it up with a trade last week on a major foreign bank.
It’s still too early to know how that trade will play out, but let’s take in what this house price rebound could mean for the markets.
We’ll delve into that below. But first…
Market Data
The S&P 500 closed down 0.4% to end the day at 5,069.53… the NASDAQ fell 0.1% to close at 15,976.25.
In commodities, West Texas Intermediate crude oil trades at $77.57, up $1.02 from Friday…
Gold is $2,042 per troy ounce, down $4 from Friday…
And bitcoin is $54,389, up $3,130 since Friday.
And now, back to our story…
The 18.6-Year Cycle Continues to Play Out
Here’s that FT report:
The widespread drop in global house prices that hit advanced economies has largely petered out, according to a Financial Times analysis of OECD data, leading economists to predict that the deepest property downturn in a decade has hit a turning point.
Across the 37 industrialized OECD countries, nominal house prices grew 2.1% in the third quarter of 2023 compared with the previous three months, up from near stagnation at the start of last year.
Only about one-third of those countries reported a quarter-on-quarter decline in the latest period, down from more than half at the start of the year, according to the FT analysis.
“The most recent data suggest that house price falls have now bottomed out in most countries,” said Andrew Wishart, senior property economist at Capital Economics. “I think we’ve had the house price correction that we’re going to get.”
Prices are certainly on the up if we look at one of the most watched house price indexes, the S&P CoreLogic Case-Shiller index:
Source: Bloomberg
The run-up on the righthand side of the chart was the Covid period. The government handouts prevented many from losing their homes… until the handouts ended, folks couldn’t keep up with repayments, and houses went on the market.
But despite all the recession talk, the U.S. economy never really came close to falling into a recession.
And if Phil Anderson is right, any talk of a recession and stock crash should be off your mind until 2026.
As Phil told his subscribers last week when he recommended that foreign banking stock:
If you were listening to popular opinion over the past year, then you probably would have missed several important calls I’ve made that directly impact your financial wellbeing.
Like how I called the March low in the stock market last year, or that homebuilder stocks would rip higher, or that the S&P 500 would end the year breaking out to new all-time highs.
Each of those calls revolves around my view that not only would a recession be avoided, but that boom times are coming for the economy.
And each of those predictions has come true… guided by my real estate cycle that unfolds like clockwork.
But don’t just take my word for it. If I’m right that the economy is just beginning boom times to complete the cycle, then we should be receiving confirmation from the right sectors.
How do we know 2026 (or thereabouts) is the time when investors should be on guard? That’s down to Phil’s 18.6-year real estate cycle and the influence it has on every part of the economy…
Including the stock market.
Here’s the Case-Shiller index chart again:
Source: Bloomberg
That major downturn on the middle-left corresponds with the stock market low of 2008–2009… which, if you add 18 years, takes you right up to where Phil expects the next downturn, in 2026.
Until then, Phil says investors shouldn’t overly worry about the daily ups and downs in stocks. We’re entering the last stage of this current cycle.
Meaning there are still opportunities for investors to cash in. Of course, if you ask Phil, it’s also the time when folks are at risk of over-exuberance.
Especially those who may have missed the recent stock gains. It’s often during the late part of the cycle that investors tend to make some of their most reckless decisions.
But we don’t expect that quite yet… maybe not until later this year or into next.
After all, the markets are still near record highs. Even Berkshire Hathaway (BRK/A), Warren Buffett’s investment vehicle, is closing in on a $1 trillion market valuation.
For now, many investors will probably assume stocks can’t possibly stay this high and must surely crash.
But the longer they stay there and perhaps grind slowly higher, the more difficult it will be for those on the sidelines to stay out of the market.
That’s when the market’s biggest move – and last upward move of the cycle – will begin.
In short, despite the record-high stock prices, it’s still a buyer’s market.
More Markets
Today’s top gaining ETFs…
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Amplify Transformational Data Sharing ETF (BLOK) +6.9%
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Invesco Dorsey Wright Technology Momentum ETF (PTF) +2.7%
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Siren Nasdaq NexGen Economy ETF (BLCN) +2.2%
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Invesco Dorsey Wright Healthcare Momentum ETF (PTH) +2%
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Invesco Dorsey Wright SmallCap Momentum ETF (DWAS) +1.7%
Today’s biggest losing ETFs…
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Utilities Select Sector SPDR Fund (XLU) -2%
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Fidelity MSCI Utilities Index ETF (FUTY) -1.9%
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Virtus Reaves Utilities ETF (UTES) -1.9%
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Vanguard Utilities Index Fund ETF Shares (VPU) -1.8%
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KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA) -1.7%
Cheers,
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Kris Sayce
Editor, The Daily Cut