It might seem counterintuitive, but residential real estate stands as a strong hedge against drops in the stock market, notes columnist Mark Hulbert in Barron's
"In 14 of the 15 previous U.S. equity bear markets, going back to 1956, the home-price index rose," he writes. "And in that lone bear market prior to 2007 in which home prices did fall, they did so by just 0.4 percent."
Of course, the home price decline during the 2007-2009 bear market for stocks represents a marked exception.
The key question for investors, then, is whether that home price drop was an aberration. Hulbert asked that question to Nobel laureate economist Robert Shiller, a housing expert.
“To some extent, it must be," the Yale professor said. "Overall there just isn’t much correlation of home prices with the stock market. So it [what happened in 2007-2009] looks like just chance.”
It's not easy to invest directly in home prices. You can buy the stocks of homebuyers or buy apartment REITs.
Elsewhere on the equities front, the dreaded Death Cross has emerged for the first time in four years.
That's when the S&P 500 index' 50-day moving average falls below its 200-day average. And that's a bad omen for stocks, says Anthony Mirhaydari
, founder of the Edge and Edge Pro investment advisory newsletters.
"The long-term trend is at risk, as the index closed Monday’s session below its 12-month moving average, a strong predictor of bear markets," he writes in The Fiscal Times. The S&P 500 had tripled from its March 2009 low before the market swoon began last month.
The S&P 500 closed at 1,972.18 Monday, and then dropped another 3 percent Tuesday. It has rebounded 1.3 percent Wednesday morning to 1,939.
"Unless stocks mount a historic charge higher here, ending September 6 percent higher, it could be game over for the bull market," Mirhaydari says. "History isn't on their side."
The S&P 500 dropped 6.3 percent in August. Since 1928, the S&P 500 has slid more than 5 percent in August 13 times, and in nine of those instances, stocks declined in September too.
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