Markets are betting on US housing recovery

By Sober Look

Both the equity and the credit markets are betting on US housing recovery.

Equity: This chart compares total return for the PHLX (Philadelphia Stock Exchange) US Housing Sector Index (companies with focus on US residential housing) with the S&P500 index. The PHLX YTD outperformance is 19%. With an estimated PE of 30-35, a great deal of growth is priced in and the group now feels overbought.

Credit: This chart from JPMorgan shows the YTD total return for the sectors in the JPMorgan High Yield (bond) Index. The housing sector has outperformed the overall index by almost 8%.

Source: JPMorgan

One Comment

  1. This looks like they feel that the bubbles will continue. Look at the real economy industrials retail and energy and all are at the bottom of the table. They may be relying on cheap chinese imports to maintain the disposable incomes so that investors can suck that extra income towards them in higher rents. This is unsustainable.