Market Timing

As we wait for the April real estate data to be released next week, let's take another look at the month end U.S. S&P 500 via Lance Roberts at ​realinvestmentadvice.com
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"With portfolios still weighted towards equity, but overweight in cash and shorter-duration fixed income, we can afford to sit still into next week and allow the market to choose its path."

"We can afford to sit still..." Yes in the cash markets, sitting still is an option with risk management in place. But in real estate portfolios, if a correction or major negative price trend develops, everyone is involved unless sellers can successfully get ahead of the change in trend. But that requires acting before a wide acceptance of a new paradigm is acknowledged. By that time, buyers will have gone on strike as they wait for their opportunity to lead the market.

Lance argues in the chart above that the...

Intermediate-Term Picture Remains Bearish

​On a intermediate-term basis, both of our weekly “sell signals” remain, and as shown below, the market once again failed at its overhead trend line last week as well as the downtrend resistance from the previous peaks. These failures keep downward pressure on the market as prices continue to follow the “path of least resistance.”

The weekly chart also shows the rare “buy” and “sell” signals issued on a longer-term basis. Currently, as the market struggles with its current correction process, it is also very close to triggering a more important “sell signal” which could indicate a further correctionary process over the next several months.

Over the last 25-years, these sell signals have only been triggered 5-other times.

1. At the peak of the market prior to the “Asian Contagion”
2. Just prior to the peak of the market in 2000
3. At the peak of the market in 2007
4. At the peak of the market 2011 as QE-2 ended and the U.S.was facing the “debt ceiling debate.” 
5. Near the peak of the market from the collision of the end QE-3, the “taper tantrum” and “Brexit.”

I can't find much of a record to suggest that a violent drop in stock market equities will necessarily drag real estate prices down, but a confluence of rising rates (Globe & Mail), stress testing (Global News), foreign buyer taxes (Financial Post), labour force displacement (Canadian Underwriter) and present historic real estate valuations (my 6 city chart) is a negative to price growth.

But I did find this chart here of the S&P 500 vs the Case Shiller U.S. Housing Index:

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It is clear that some sort of correlation exists between stock values and real estate values.  Stocks started their recent bull run in 2009.  As you can see from the chart above, real estate values didn’t start moving up steadily until 2012.  So there is a lag here.  But what is interesting is the correction in stock values in 2008 matched up with real estate values.  In fact, real estate values started trending lower before the market crash. DoctorHousingBubble.com

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In ​January 2018 the S&P 500, DOW and TSX peaked.

Toronto real estate peaked in 1Q 2017 although condo prices hit a new price high last month.

Vancouver prices peaked 3Q 2017 and like Toronto, strata prices are still peaking as of last month.
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Calgary prices peaked 2Q 2017 with condo prices hitting their high back in 3Q 2016

​U.S. vs Canada Private Debt to GDP

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Steve Keen "Can we avoid another financial crisis?"

The U.S. and the U.K. can but China, Australia, Canada, Belgium, Norway, and Sweden are next. (paraphrased)