Frequently, there’s money to be made in the stock market in the months following the initial curve inversion. After the inversions of August 2006 and June 2019, the S&P 500 rallied another 23% and 19%, respectively, into its final bull market high. If this cycle plays out in textbook fashion, the business-cycle peak would arrive in September.
Those in their peak earning years (40s and 50s) who’ve also enjoyed the stock market’s windfall gains are very likely to have seen their annual expenses climb much higher than the Consumer Price Index over the last several years.
Are mortgage rates still too high for a rebound when looking at real mortgage rates?
Housing stocks, and the enablers that helped create the bubble (Financials), are following the usual pattern of busted bubbles. After the bust, these past bubbles typically see a beta bounce establishing post crash highs. After that, it can take many years before these highs are again broken.
We consider it incredible that most of the leading economic indicators have staged such traditional V-shaped rebounds with virtually no boost from the housing sector.
A historic look at farmland prices and home prices helps put today in proper perspective. Farmland price levels look especially vulnerable. Considering the high level of leverage now employed by some land owners, the high interest rates and the low cash flow, auction hammers may soon echo through rural America. Home prices are not as vulnerable but declines of 20% in nominal and real dollar values would not be surprising.