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By Jason Stipp and Jeremy Glaser | 11-28-2014 08:00 AM

5 Issues Still on Investors' Plates

Central Bank recipes, leftover housing disappointments, and full valuations may still cause indigestion for investors, says Morningstar markets editor Jeremy Glaser.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five.

Today we have a special Thanksgiving edition. Morningstar markets editor Jeremy Glaser is here with five things that are on investors' plates.

Jeremy, thanks for joining me.

Jeremy Glaser: Happy Thanksgiving, Jason.

Stipp: There is likely not a lot of food left on investors' plates, but there are still some issues that they are grappling with. The first one is central bank activity, not only here in the U.S. but also abroad.

Glaser: This is one of the big questions, and it really is two separate ones. The first is with the Federal Reserve: when will rates rise in the United States? The Fed seems to be saying that the middle of 2015 is when they are thinking of doing it, and the market very much has that priced in at the moment. I think barring any exceptional changes in the U.S. economic picture, we can expect rates to rise here next year.

But when we look to Europe, the question is a little bit more interesting. Mario Draghi, the head of the ECB, has been talking up the fact that the ECB is ready to have more aggressive asset purchases; they are ready to act to try to get European growth going again and to keep inflation from becoming any lower than its already very low level.

But Draghi faces a lot more structural and political impediments to actually implementing these policies than, say, you have in the U.S. or Japan. So, it will be fascinating to watch if he is actually able to back up his statements with these actions over the next couple of months, and if they have the desired effect.

Stipp: The financial crisis is well in the rearview mirror by now, but housing is still casting some shadows on the economy.

Glaser: Housing has been a disappointment in 2014, and we got more proof of that when the Case-Shiller Index for September came out this week, showing that home prices are increasing but at a slower rate than they were in the previous month, and that's the continuation of a trend.

We have a lot of issues here from affordability to access to credit to a mismatch between the kind of homes that are being built and that are available, and the ones that people want. Those issues continue to hold housing back.

Housing is important to the broader economy, and if can get housing starts back to a more normalized level--even if it's below where it was at the peak before the financial crisis--that really could be a big boost to growth.

We're looking for signs that housing is ready to start turning around. We got glimmers of hope from Home Depot and Lowe's, who, in their earnings calls, said that they are starting to see some more confidence in the housing market, but it might take some time to see that confidence translate into real numbers, into better economic growth, and into a real tailwind for the U.S. economy.

Stipp: Here is one that's causing investors some indigestion: valuations. It looks pretty fully valued across the marketplace, with not a lot of discounts to be found.

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