The annual tradition of investors bidding up homebuilder stocks in the winter months in anticipation of a busy spring building season, known as the “Hope Trade,” is in jeopardy due to uncertainty over whether the U.S. Congress will seamlessly pass a budget in January, address the debt-ceiling deadline in February without a hitch, or a dampening of demand thanks to rising interest rates when the Federal Reserve begins tapering its bond-buying program, the Wall Street Journal reports.
“The reason you play the hope trade is that you hope next year is going to be better, but I don’t see any reason for that hope this time around,” Alex Barron, president of the Housing Research Center, a firm that tracks builder stocks, told the Journal.
Others like Raymond James & Associates analyst Buck Horne think that the builder stocks will outperform the wider stock market again this year in the winter months (Nov.15 to Jan. 31) as they have in 23 of the last 29 years.
“There always is concern about government, interest rates and the economy that come into play,” Horne told the Journal.
Source: Wall Street Journal