Sat, 10 May 2008
May 10, 2008
As dire as it is, the housing slump is not as big a fac-
tor for the economy as investors think. True, the
downturn has been unprecedented, leading to foreclo-
sures, seizures in the credit markets, erosion of house-
hold wealth, record low consumer confidence, and, until
recently, stock market declines. But residential con-
struction contributed just 3.8 percent to first-quarter
a high of 70.8 percent of GDP in the first quarter of
2008, based on advance numbers. Exports, another
rising category, added 12.7 percent.
"Do not freak out about housing," says JPMorgan
Funds Management Chief Market Strategist David Kel-
ly. "We pay too much attention to housing in terms of
how it's going to direct the
stocks are under-priced as a result. Housing is closely
tracked, with frequent updates on sales, construction
activity and prices. "The problem is, every one of those
numbers is lousy, and every one makes the evening
news," notes Kelly.
Citi Investment Research strategist Tobias M.
levkovich says consumer spending is more important
for stock prices. "Too many critical points are missed
when investors only hear one data point and don't ana-
lyze the rest of the information," he writes.
Of course, housing shouldn't be dismissed. Mort-
gage troubles helped cause the current credit crisis.
Christopher Burdick, director of economic analysis for
spillover effects on spending. "The concern is warrant-
ed," he says.
But Kelly thinks investors should pay more attention
to the stronger-than-expected growth in services in
April. In addition, an early reading on first-quarter GDP
points to growth, albeit at a sluggish 0.6 percent pace.
SOURCE: Bureau of Economic Analysis Dani and Girard, AP
Fri, 9 May 2008
May 9, 2008