This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Only Thing Tapered in 2013 Is Homebuilders

"If the economy grows, housing gets better, quicker." -- Jamie Dimon, JPMorgan Chase

NEW YORK ( TheStreet) -- Even though "selfie" appears to be the word of the year in 2013, those involved in financial markets know the award should really go to the word "taper." After bringing up the idea back in May, there isn't a single moment where the term is not mentioned in the media.

Overhyped? Probably. The Federal Reserve got scared by the yield spike that occurred starting in May, citing "tighter financial conditions" specifically due to the bond selloff and the negative impact that would have on the economy in September.

Yet, here we are, and not only has there been no taper in the Fed's stimulus, but more bond buying may be on the way thanks to Janet Yellen next year.

Why is it so hard for the Fed to back away? Put simply, because its credibility is at stake in terms of forcing reflation through its unemployment and inflation targets. Both are still very far away from stated goals, and it's not clear if quantitative easing is the answer.

Everyone focuses on the question of when tapering will occur, but the real question should be whether it matters. After all, those areas most sensitive to reflation and economic activity are failing to confirm stock market exuberance.

The only thing tapered in 2013 is homebuilder optimism and bets on the biggest driver of reflation.

Take a look below at the price ratio of the SPDR S&P Homebuilders ETF (XHB) relative to the S&P 500. As a reminder, a rising price ratio means the numerator/XHB is outperforming (up more/down less) than the denominator/S&P 500. A falling ratio means the opposite. Note that homebuilders have lagged essentially for all of 2013, and fail to show any real strength to come thus far.





This remains one of the larger disconnects happening within the stock market. Equities in the U.S. have had an immense run, but it has not been led by real economic drivers and reflation. This is traditionally abnormal, and begs the question of just how long stocks can remain elevated without a pickup in economic activity and bets on future housing.

From that perspective, being nimble continues to be important. Don't taper risk management in favor of the bull narrative, with which housing has disagreed all year.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $126.52 0.09%
FB $79.94 -1.60%
GOOG $567.49 -1.40%
TSLA $192.56 -4.00%
YHOO $43.53 -1.40%

Markets

DOW 17,843.84 -291.88 -1.61%
S&P 500 2,072.98 -28.06 -1.34%
NASDAQ 4,930.3720 -52.4370 -1.05%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs