For the first time in a long time the investment world is bullish on the outlook for the S&P 500 and looking for the next Phase-One issuance. The sell side of the index has clearly seen the writing on the wall, but should they let the market take them by surprise?
That is a story we will be watching closely as the next two months of the Index will see dramatic movements and post the end of Phase-One in the mid-to-late third quarter. I believe this is where the major investors are right now, but I don’t think anyone will be surprised in the long run.
So what does this mean for our current earning season? We have already seen the boomers to pull out of the market, especially since the first quarter of this year. We also know that the boomers are not looking for any further gains because it is too soon, and the valuations are now rising higher than ever.
But it seems to me that this will not affect the real estate markets either, and there are several signs that show this. One of these is the declining housing inventory in prime areas of the country.
The region with the highest rates of foreclosure is increasing, while the county growth rates and the level of foreclosures are decreasing. This is another indication that we are in a new normal and will be for a long time.
The current market is slowing down, and the possible cause of this is the fact that home prices are down since the market is moving into a new normal. Many financial institutions are adding deposit checks to these markets, but this is not happening as quickly as people expect.
One thing I have noticed is that there is one major city that is not slowing down, and it is Phoenix, and it has the same trend that is evident in all of the other real estate markets. It is expected that it will stay that way for a long time as a growing population increases the demand for more housing units.
As people see the housing market going the way it is, they will buy as long as it has good returns, and if it continues to decline as it has in the last few months, you will start to see this happening. It is interesting to see that the problem here is not in the low income areas, and everyone is seeing the next phase of the economy.
They are seeing that they have to return to their home countries and are already seeing the construction of cruise ships and resorts being built in Central America. Look for a decline in American exports in the near future, and this has an impact on the current economic conditions.
My biggest concern in the current economic outlook is the fact that the S&P 500 continues to drop. There is nothing that indicates the market will slow down anytime soon, but I think this is one of the main reasons why the Index has been declining for so long.
The market is now in a serious financial crisis waiting to happen, and I believe there is nothing that can be done to prevent it. Time will tell, but this will be a real look at the markets in the near future.