Falling Homebuilder Stocks Bode Ill for Market, Economy

 

The recent decline in homebuilder stocks bodes ill for the U.S. economy and stock market as a whole, says Michael Gayed, chief investment strategist for Pension Partners.

"If you take a look at homebuilders, they effectively topped out around May, which is really when a lot of this tapering talk started to get into the headlines," Gayed told Newsmax TV in an exclusive interview.

Gayed was referring to comments from Federal Reserve Chairman Ben Bernanke that the Fed may taper its quantitative easing soon.The PHLX Housing Index of stocks related to home construction has dropped 11 percent in the last two months.

"Now homebuilders, when they outperform or underperform tend to precede market moves," Gayed said.

"That should make some sense because homebuilding, housing is a key component to the wealth effect and economic growth overall. The fact that they're weakening might mean this spike in [interest] rates on the taper talk is actually going to cause a slowdown."

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