Readers may recall how, during the long housing boom of the 1990s and early 2000s, some commentators kept forecasting the imminent demise of the housing market on the grounds that one day they were bound to be right. The doomsters are at it again.
Two brokers called the top of the market for housebuilders this week, provoking sharp fall in shares in the sector. Estate agent Countrywide (CWD) added fuel to the fire by issuing a profit warning because of fewer home sales.
Now, I know that housebuilders’ share have rocketed since the recovery took hold – I know because I hold Barratt Development (BDEV) and Taylor Wimpey (TW.) and I am very happy with their performance since I bought them five years ago.
I admit I would not want to chase the shares much higher at this stage. However, the housing market is far from finished, as Persimmon (PSN) made clear in its trading update in mid-week. In fact, the boom that was concentrated heavily in London and within the M25 has really rippled out. Even if the South East slows there is plenty of momentum elsewhere.
The same arguments of 10-15 years ago still apply to underpin the housing market: demand for housing far outstrips supply. I would rather hang on to my shares for too long and risk the bubble bursting rather than bail out now and miss the continuing good times still to come.
Is it Foolish to Expect a Festive Market Rally?
I am by nature an optimist as far as the stock market is concerned but I paused for thought this week when pubs group Wetherspoon (JDW) and oil and gas services engineer Amec Foster Wheeler (AMFW) joined the list of companies issuing profit warnings and, in Amec’s case, slashing the dividend. Am I deluding myself in expecting a Santa Claus rally this year?
Certainly there are plenty of clouds on the horizon, sufficiently dark to prompt Bank of England Governor Mark Carney to hint that the UK economy will not be sufficiently strong to merit an interest rate rise or withstand a sale of gilts bought under quantitative easing for a while longer yet. Economic growth is likely to be more subdued for the next couple of years, likewise dividends.
Yet I cannot help feeling that with the FTSE 100 index more than 700 points, a good 10%, lower than its April peak a great deal of bad news is already factored into blue chip shares, while many medium and smaller companies are sailing along quite nicely. Much of the pain is concentrated in a handful of stocks, mainly in the resources sector and those dependent on it.
So I will remain fully invested, and I have nearly enough cash by way of accumulated dividends in my ISA account to take another punt well before Christmas.
There, I’ve Said it Again
Another three months have flown by and here we are again with a trading update from retailer Marks & Spencer (MKS) showing increased food sales and lower non-food sales. Womenswear, once the cornerstone of M&S, has been stagnant, which is actually something of an improvement.
The update was remarkably upbeat, which may be why the shares responded so well, with bad news pushed as far out of sight as possible, and M&S stressed the sharp rise in underlying profits, which stripped out stores refurbishments. I am unhappy with this treatment, as sprucing up outlets is a recurring cost for all store chains.
But most of all I am disappointed that yet another highly promoted collection of womenswear has failed to reverse the slump in sales. M&S is not a bad investment. However, until someone really does give women a reason to return to the stores other than for £10 meals for two each weekend this is not one for me.
