Homebuilding and Retailing Stock Indexes Speak Volumes
Together, consumer spending and residential investment (housing) account for about 75% of GDP. Financial market prices tend reflect investors' expectations. These expectations may or may not turn out to be realized but they are based on the information and analysis at hand. Because investors stand to gain or lose funds based on the positions they take in a market, there is an incentive for them to seek out the most information and best analysis when placing a "bet" in a market. Below are charts of two stock market indexes - the Philadelphia Stock Exchange Housing Sector Index and the S&P 500 Retailing Index. Both of them set 52-week lows today. What does that tell you about the U.S. economic outlook for the next several quarters? What do you think will happen to these indexes if the Fed continues to push up the fed funds rate? Perhaps someone ought to email Chairman Bernanke a copy of these charts to help prepare his remarks before the Senate on Wednesday morning.
Philadelphia Stock Exchange Housing Sector Index
S&P Retailing Index