Tackle Today: Stocks are Forward Looking
January 11, 2023
Intelligent investors view the stock market as a forward-looking economic indicator. The crowd does a pretty good job of looking far into the future and discounting those developments now. This is why the stock market usually peaks and troughs before the economy does. It sniffs out the turn before the data shows it.
The current debate is whether stocks have fallen sufficiently to bake in whatever bad juju comes our way because of ballooning interest rates. Bears will say a recession cometh and stocks haven’t fallen nearly enough. Bulls will say we’ll either skirt a recession or if we have one, it will be mild enough that stocks have already fallen sufficiently to discount it.
The behavior in homebuilding stocks is illustrative. While high interest rates and the supposed winter descending on the housing market have sentiment in the toilet – homebuilder stocks are pushing to six-month highs. XHB fell 41%, bottomed in June, and looks bullish here.
Chart of the Day: DR Horton (DHI)
DR Horton has already rallied 59% off the lows.
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