Rents are rising, vacancy rates are near record lows, housing inventory is limited (especially new units) and builders started construction on 1.2 million new homes last year. In our view, there are positive signs that suggest the long, gradual housing recovery will continue and possibly even pick up momentum over the next few years. Here’s why we’re optimistic on the industry.
Global equity markets have set new highs in the first couple of months of 2017. Cyclical stocks — companies in sectors that are more correlated with fluctuations in the economy — have climbed strongly since last July as global economic growth expectations have built momentum, especially in the U.S. In contrast, defensive stocks have lagged.
Our Chart of the Week shows that, while the Federal Reserve raised rates in March, rate hikes are still very rare across the globe. With so much speculation over the past several years about whether the Federal Reserve will raise interest rates, it is easy to forget how unusual a rate increase is — and not just for the Fed, but for any major central bank.
When the Federal Reserve met this Wednesday, its committee members voted to raise the federal funds rate 25 basis points to a range of 0.75%–1.00%. The market anticipated this move, with futures pricing having indicated more than an 80% probability of a hike as of late last week. We see three central reasons why the Fed opted to raise rates.
A powerful rally in U.S. stocks since the November elections has underscored a long-running trend in the financial markets: U.S. stocks have outpaced developed-market equities in Europe and Japan for 86 months on a rolling three-year basis. Despite the dominance of U.S. stocks during this seven-year period, there are many compelling reasons to remain invested in international stocks as part of a well-diversified portfolio.