22 Jan Investors Take a Step Back, for Now….
After a strong day on Friday, stocks are down sharply in early morning trading. This isn’t yet a concern, as stocks remain within a very powerful upward trading cycle. If this downward momentum is strong enough to break beneath the floor of support, then stock investors will become concerned, and rightfully so. However, this is likely nothing more than a healthy move to the bottom of the trading channel before stocks make another run higher. Investors seem to be highly focused right now on short-term gains, appearing to be oblivious to the realities of a 32-day old government shutdown and clear signs of global economic slowing.
The residential real estate market showed continued signs of slowing, as Existing Home Sales fell to a three- year low. Further, on a year over year basis, home values increased at the slowest pace since February 2012. With inventory levels also climbing higher, we can expect to see continued softening in home prices. Although they are still expected to rise in 2019, it seems likely that we are getting closer to the end of a bull housing market.
Now in its 32nd day, the government shutdown appears no closer to a resolution than it was on day one. This is becoming a terrifying experience for many of the roughly 800,000 federal employees who are not receiving a paycheck. When you consider all the mortgages, car loans, utility payments and other bills due, I can’t imagine how this will impact the families involved. Not to mention the basic needs such as food. If this shutdown continues to where federal employees miss a second paycheck, I expect to see more significant repercussions.
Although there is no need to immediately rush in to lock, we must consider that stocks are still within a strong upward trading channel and can quickly correct. If you choose to float, do so only by keeping one eye on the markets and being prepared to lock.