The market is starting to look like it’s just as scripted as the National Football League.
That’s a joke, but seriously, the economic numbers couldn’t be coming in any better if Jerome Powell and the FOMC were writing them themselves. For the record, they’re not.
This morning’s release of the Fed’s favorite data, Personal Consumption Expenditures index, was spot-on for the month of July… spot-on.
The report showed that inflation continued to cool at a steady pace through July with a monthly reading of 0.2% and a year-over-year reading that reflects an inflation rate of 2.5%.
That 2.5% reading is unchanged from June’s reading.
Something important to remember is that we’ve gone through months of dropping some very high monthly readings from a year ago out of the one-year lookback. That means from a comparable perspective, it is going to be harder for inflation to continue to move lower as quickly as it was six months ago.
The same report also showed that you and I are out there making and spending more money. That’s good news for the economy as a strong consumer is going to be required for the Fed to hit its goal of a soft landing.
Is the Housing Market Scripted Too?
Earlier this week, the housing market got a boost from the latest S&P Case-Shiller Home Price Index. The report showed a much stronger surge in existing home prices for the month of June, good news for all of us that have been pondering the sale of a house.
We talked about this last week when I wrote about how “This Housing Giant Just Told You When the Housing Boom Is Going to End”.
I was serious, this is the script for the housing market over the next 6-12 months, and the Case Shiller number played right in to the scene perfectly.
Housing prices showed their surprise spike because people are out there looking again, it’s as simple as that.
Demand for homes will continue to exceed inventory for the next year as more buyers hit the market, we know that. But rising prices combined with lower interest rates are going to give those of us that have been waiting for the opportunity to “downsize” our chance.
Here’s what you should expect.
The spring selling season in 2025 – normally kicks off in late January – is going to be one for the record books as would-be and existing homeowners swap through houses like a Saturday Night game of Monopoly.
That’s where your existing housing prices will start to peak, and when the Fed just may stop lowering rates to make sure they don’t create another housing bubble.
Somewhere near the second half of 2025 we’re going to see the homebuilding companies slide into a serious correction as inventory will finally outpace demand. That’s the time to make sure that you’re clear of the housing correction.
Here are two ways for you to play this trend for profits.
First, take advantage of the “transactions” that will happen in the business.
Zillow Group (Z) is a stock that I’m eyeing to benefit from the Real Estate transactions.
It’s simple, I get two emails a day from Zillow and two from Redfin (RDFN). At some point I’m going to hit the “Schedule a Viewing” button just like everyone else in my position.
Bam, they’re on their way to making a small payday. This doesn’t include the advertising and other revenue that Zillow will bring in along with the real estate fees. More people like you and I getting emails means more revenue for Zillow.
The stock just broke into a long-term bull market last month and has a target price of $80.
Second, Trade the Financing.
Most of those transactions will include a bank or financial institution for the lending side of a home purchase.
My favorite company in this space is Rocket Companies (RKT).
I highlighted the company’s stock two months ago as a “Fast Profits” trade.
Click here for the details of my analysis of Rocket Companies.
The stock has already exceeded my target price from two months ago, along with some incredible gains on the LEAPs call option I suggested, but things are only getting started here.
Rocket Companies is set for another 30% run to my upgraded target price of $25.
We’ll cover more on the housing market and a deeper dive into the banks next week as a continuation of the run-up to the Fed’s first rate cut on September 18.
