As the Obama administration prepares the details behind a highly anticipated stimulus plan, investors are placing bets on sectors likely to benefit and infrastructure is among the favorites. The Wall Street Journal reports that the new administration will need to spend $20 billion a year above current levels on roads and highways just to maintain today’s levels of highway safety and traffic flow.
November housing starts dropped 19% to 625,000, the lowest level since the Commerce Department began keeping records in 1959. According to MarketWatch, economists had predicted a seasonally adjusted pace of 725,000 in November.
As the rest of the economy struggles with the credit crunch and rising unemployment, McDonalds (MCD) has been on a tear. Cumulative earnings are up 42% over the past four quarters and Q4 appears to be on track with October sales up 8.2%
After the Federal Government threw a lifeline to Citigroup (C) at the beginning of last week, the large cap financials have recovered nicely. The Financial Select Sector SPDR Fund (XLF) is up 35% from the close on November 20. Over the same time period, the S&P 500 (SPY) is up 19%.
Market turmoil and stronger gold prices caused the stocks of gold mining companies to climb sharply on Friday. The S&P 500 ETF (SPY) hit a new 52-week low on Friday before bouncing back late in the day to finish up 5% on the day.
Investors seeking to diversify a US-centric portfolio should take a hard look at real estate. In a recently completed study, researchers found that the correlation of property securities across borders was much lower than for equities or bonds.
Unemployment is at a 14 year high according to figures released by the Labor Department last Friday. The unemployment rate spiked to 6.5% in October from 6.1%.
In what has been a rough year for US stocks, international stocks are down even more. Through October, the Vanguard FTSE All-World ex-US ETF (VEU) is down 44% compared to the Russell 3000 Index Fund (IWV) which is down 33%.
Municipal bond prices had been hurt by concerns over mounting government budget deficits, declining tax revenue and sales by money managers to meet redemption requests.
Outstanding consumer credit declined at an annualized rate of 3.75% in August on a seasonally adjusted basis according to the Federal Reserve Bank of New York. The monthly decline was the first since January 1998 and only the second since the recession of the early 90s.