A Booming Housing Market, Sinking Dividends, and Revealing Correlations From the S&P 500
August 26, 2020 | FIRESIDE CHARTS
New home sales surged 13.9% in July to their highest level since 2006 in a pandemic-era trend that could spur more overall economic activity. Meanwhile, despite record performance, S&P 500 Index® dividend yields are sinking. Is it all due to Covid or is it a sign of something more? A growing dispersion between the index’s performance and the rest of the market could indicate trouble ahead (think 2000-2002), and a negative correlation with the 10-year UST yield reveals just how unreliable bonds have become as a hedge. Is it time to say goodbye to the 60/40 portfolio?
1. Ultra-low mortgage rates and pandemic-driven demand is spurring a robust housing recovery. Historically, housing recoveries are a boon for the overall economy as the labor to build, the commodities needed to build, the durable goods needed in the kitchen and basement, the sundries and furniture demand and even the ongoing maintenance all spur economic activity…
Source: The Daily Shot, from 8/26/20
2. Another strong regional Fed report.
Source: The Daily Shot, from 8/26/20
3. Ag prices are finally rising, but it is mostly due to bad weather/growing conditions…
Source: The Daily Shot, from 8/25/20
4. It feels like 1999, which by the way was fantastic, but euphoria always comes to and end…
Source: The Daily Shot, from 8/25/20
5. Covid has skewed the data, but another warning sign?
Source: The Daily Shot, from 8/25/20
6. With historical correlations removed due to the ultra-low interest rates, bonds are NO LONGER a reliable hedge for stocks!
Source: The Daily Shot, from 8/26/20
7. The Chinese stock market must break out one way or the other…
Source: The Daily Shot, from 8/26/20
8. As the world’s economy went on a Covid induced retreat, China’s exports remained steady indicating they are taking market share from others…
Source: The Daily Shot, from 8/25/20
9. Recognizing the regional differences in infection rates, it appears that the U.S. as a whole is on the downside of wave 2. Give this virus an inch, and it will take a mile. History would suggest a third wave this fall/winter…
Source: JHU CSSE, as of 8/26/20
10. Globally, the picture is less certain with large disparity in infection rates. We are still suffering ~250,000 new cases per day. As schools open across the globe, this is likely to take a bad turn… .
Source: JHU CSSE, as of 8/26/20
11. You decide…
Source: The Daily Shot, from 8/246/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.