• March 25, 2023

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The homebuilder positives, particularly the mortgage rate dip and the new home sales and potential buyer traffic bump, might look too small to produce optimism. After all, uncertainties and inflation realities continue to weigh on consumer sentiment, the usual killer of consumer cyclical buying. While slipping home prices can boost affordability, the still high prices and mortgage rates remain financial and psychological roadblocks for many.

So, how can those mini-positives be important? Because new home buying is the first industry out of the blocks in the new year. Therefore, with homebuilders noting a pickup in sales and traffic, this could be a breakout year. Homebuilders have excess homes for sale after a sluggish end to 2022. So, they are likely willing to provide attractive buying terms.

So, what else must go right to get a full-fledged economic growth period?

  • First, an end to the Federal Reserve interest rate raising, so mortgage and all other rates can establish themselves as financial companies, investors and borrowers gain confidence through reduced uncertainty
  • Second, a shift to negative inflation rates for food, fuel and utilities. “Pricing power” and special conditions allowed these companies to push prices up. Consumer shifts in buying decisions along with competition should now start a downtrend – particularly in this negative GDP growth quarter.
  • Third, banks, always cautious at first, will finally get with the program as depositors transfer their funds to higher yielding accounts. Then, to pay the higher interest expense, they will get more aggressive about lending.

Will all this happen? Yes. The concern, though, is that the timeline will be drawn out. While there is some truth to the belief that consumers are locked into higher inflation risk and reactions, the second quarter is a traditionally high growth period that could reverse those winter doldrums.


So, it’s up to businesses and governments to get smart. Some will, but don’t expect the layoff laggards to lead. They’re trying for earnings growth by shrinking costs. That loser strategy rarely pays off in the end.

The bottom line: Perhaps things are ready to get fun

What a long slog we’ve had. I had expected that after the fad shakeout, there would be a washout that created unusually good buying opportunities. However, it appears that bargain ravine has been bridged.

One contrarian buying sign would be companies cleaning house, expensing and writing off wherever possible. The purpose would be to create a financially slimmed-down foundation upon which a new growth trend could be built. An example is the major banks that recently outlined their strategy of setting aside funds to cover losses should a recession hit.

So, now looks to be a good time to begin investing in companies that could have good growth prospects in a new growth trend. And remember, there is no guarantee that past winners will enjoy a repeat performance.


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