Buy the Dip
Based on our forecast for the stock market to move much higher in the second half of this year, today’s sell-off is a great opportunity for anyone with cash to move into the markets aggressively. Today’s contraction was based on a better than expected housing number that prompted bears to argue that a Fed rate cut was off of the table. As of right now the futures are projecting a less than 50% chance for a rate cut this year. Whether market participants see a rate cut coming this year or not, the market has significant upside.
Financial Watch maintains that the economy has softened enough for a rate cut to be back on the table later this summer. Decent employment statistics is the only factor holding the Federal Reserve back. One of Wall Street’s biggest firms put out a report today that few paid much attention to arguing employment figures have been overstated due to the on-going housing contraction. At Financial Watch we find it surprising that job growth has held up as well as it has with basically flat-line growth. Although further clouding the picture is decent retail numbers that are now just starting to show signs of weakness. We continue to expect employment numbers to taper off into the summer months.
Tomorrow the National Association of Realtors will release its latest report on existing home sales. Based on the conversation we are hearing, it should greatly contradict today’s report that home sales are picking back up. In fact, we would not be surprised if it shows substantial further deterioration in the housing market during the critical spring buying season. Should the report come in as we expect, it is possible further downward pressure could be exerted on the markets. In Financial Watch’s opinion mid-day tomorrow presents a great opportunity for buyers to take advantage of the sell-off.