Morning Report Wednesday 20 May 2015
US Housing Starts reach the highest level since 2007
Housing starts in the US surged last night to an impressive 20.2% for April; this volatile statistic is remaining clearly in expansion mode lending support to calls for a rate hike in the US. Currently there are very mixed opinions about when interest rates will rise in the US, but the economists are 100% in agreement that rates will rise in the US going forward:
• The current US Fed Fund Rate is 0.25% with the average (median) rate for the second Quarter of 2016 at 1.25% - see chart 4.
The correlation between the US Fed Funds Rate and Equities is almost scary, with the Bull market in US equities basically commencing when the Fed crunched rates to 0.25% and implementing Quantitative Easing (QE). Personally, after watching US equities rally 218% since early 2009 and the introduction of QE, predicting a 15% correction when interest rates rise is hardly an extreme call.Importantly, markets look ahead so as US Economists are forecasting rising interest rates, I thought it was an ideal time to look at companies exposed to New Home Starts:
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