Stock futures remain lower after U.S. housing data

As the global market continues to fluctuations based on U.S. housing data, stocks remain lower as investors wait for more economic insight into the future. Despite small gains over the past 24 hours, stock futures remain at a disadvantage—consumers, experts, and investors are all keeping a wary eye on the market, unsure as to where the homebuilding sector will take the economy. Though many are looking to the future with trepidation, further analysis of the situation may reveal that the outlook isn’t as bleak as it may seem.

Table of Contents

• 1. Volatile Housing Market Storm Clouds on the Horizon
• 2. US Housing Data points to Continued Market Uncertainty
• 3. Stock Futures Passing The Buck for Gloomy Outlook
• 4. Strategies for Investing in a Volatile Market Ahead
• Q&A

1. Volatile Housing Market Storm Clouds on the Horizon

The current housing market is anything but stable. Economic indicators suggest that storm clouds are gathering on the horizon and a significant number of homeowners are beginning to feel the impact.

From rising interest rates to fluctuating markets, here are some key factors that could play a role in a potential housing crisis:

• Lack of Affordable Housing:With fewer entry-level homes on the market, many potential buyers are shut out. Additionally, the surge in rent prices, particularly in metropolitan areas, leaves many living paycheck-to-paycheck with no option to save for a down payment.
• Heavy Mortgage Debt: Many homeowners are further hindered by high mortgage debt, making it harder to keep up with payments or refinance into a better deal.
• Unsustainable Price Growth: Property prices in some regions have grown rapidly, outpacing wages and pushing home ownership further away from those who need it.
• Unforeseen Events: Unexpected occurrences, like natural disasters or trade wars, can have unforeseen effects on the market, both locally and globally.

The future of the housing market remains uncertain, but one thing is becoming clear: homeowners are going to have to weather the storm.

2. US Housing Data points to Continued Market Uncertainty

Market uncertainty continues to remain an obstacle for growth in US housing amid the economic downturn. Rising unemployment, weak consumer confidence, and tight availability of bank credit are limiting potential buyers from taking on mortgages. With more families turning to rental housing, rents continue to rise, further squeezing income.

What’s more, uncertainty about government investment in housing is impeding the industry. Without a stable government policy and clear investment strategy, potential buyers and landlords are feeling uncertain about the industry’s long-term prospects. This is leading to:

• Reduced demand for housing purchases;
• Slower growth in the private rental market; and
• Crippling construction lending.

Experts predict that unless the housing market is stabilized and purchasers become more comfortable with buying a home, market uncertainty will continue to derail the industry’s recovery.

3. Stock Futures Passing The Buck for Gloomy Outlook

Futures markets are revealing a rather gloomy outlook for stocks worldwide. The markets are buckling under the weight of increasing COVID-19 cases, a faltering global economy, and an uncertainty around the timeline of vaccine roll-out.

Here are 3 ways the markets are showing signs of strain:

• A historically high volatility index is driving investors away from traditional stockpicking strategies.
• Risk tolerances are disproportionally low for certain sectors, particularly those more affected by the pandemic such as travel and leisure.
• The index futures of numerous countries are showing signs of drastic underperformance, signaling low confidence in the stock markets.

Unease and confusion prevail as different analysts predict drastically differing futures. But what is clear is that the market’s downward spiral is nowhere close to ending and its more moderate gains aren’t here to stay. As a result, investors should be cautious and seek the advice of their financial advisors before buying any stocks.

4. Strategies for Investing in a Volatile Market Ahead

Stay the Course

Building a solid financial future requires staying the course and staying brave in the face of turbulent market conditions. Even when markets get volatile, it’s important to remember that your investments have long-term horizons that will outlast the present circumstances. Here are a few strategies to stick to –

• Create a diversified and balanced portfolio: Diversification is a great way to protect yourself from the ups and downs of the market. By allocating your portfolio to different asset classes, you can balance your risk exposure and protect the value of your investments.
• Consider re-balancing: Re-balancing your portfolio is a great way to capitalize on any volatile periods. When stocks decline in price, you can reposition your investments in more low risk assets to reduce your overall risk.
• Invest in U.S.D.A. bonds: The U.S. Department of Agriculture (USDA) offers federally backed bonds that can be a great way to invest in times of market volatility. These bonds are considered to be a safe-haven asset and they typically pay fixed interest rates.

Think Long-Term

It’s important to remember that long-term performance is more important than short-term market fluctuations. By taking a long-term approach to investing, you can allow your investments to recover from any volatility in the market. Here are some tips to remember –

• Set realistic expectations: Setting realistic expectations is essential when investing in volatile markets. Consider the long-term potential of your investments and understand that the short-term fluctuations can be temporary.
• Consider tax-loss harvesting: Tax-loss harvesting is a way to help offset the capital gains that can be incurred during volatile markets. By harvesting losses on certain investments, you can offset any future taxable income.
• Focus on dividends: Dividend stocks can be a great way to offset the volatility of the markets. By focusing on stocks with generous dividends, you can reduce the overall risk of your portfolio.

Q&A

Q: What was the impact of the U.S. housing data on stock futures?
A: Stock futures remain lower despite the release of positive U.S. housing data. This suggests that the market has yet to fully price in the potential market-positive implications of this data.

It’s clear that stock futures are still feeling a bit uncertain after the release of the U.S. housing data. It will be interesting to see how markets respond in the coming days as investors assess the figures. Only time will tell if the good news will outweigh the bad news for stock futures.