Bumpy Road Toward the Fiscal Cliff
While 'fiscal cliff' rumors are driving the markets (both up and down), this week's real estate-related news was quite positive.
The economic news flow this week, at least through Wednesday, was slow. However, the reports we did get were excellent, with builder sentiment and housing starts far exceeding expectations. Meanwhile, existing-home sales managed to match expectations, despite the hurricane and a lack of available inventory.
The lack of economic news didn't stop the markets--they had one of their best rallies of the year on Monday as politicians struck a conciliatory tone relative to their fiscal cliff negotiations. As much as I loved the rally, the market volatility relative to each little whisper is scary, especially because volatility works in both directions--up and down. Although I'm very optimistic that a peaceful resolution will be reached, there are certainly potential bumps along the way. As a reminder, markets made wide swings during the debt ceiling negotiations in 2011. Moves of up to 10% in a relatively short period would not be surprising. So fasten your seat belts.
Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.