Welcome to Extreme Investor Network, where we provide you with unique and valuable information to help you make the most of your investments. Today, we are diving into a reliable seasonal trend on Wall Street that is set to come into play, with solid fundamentals backing it up.
According to Tom Lee, head of research at Fundstrat, the firm is initiating a six-month “tactical overweight” on the homebuilding sector. This decision is based on a historical pattern where homebuilders typically see a rally from late October to late April. In fact, since 1999, the group has averaged a gain of 18.7% during this period, compared to an average decline of 2.3% outside of it.
What makes this year particularly interesting is that the seasonal trend aligns with the current rate-cutting cycle by the Federal Reserve. This additional support could give homebuilders’ stocks a significant boost in the coming months. Lee points out, “The fundamental backdrop for homebuilders in the next 6 months is compelling. The Fed is cutting interest rates at a time when U.S. housing has been in a recession. Thus, there is upside potential for revenues and earnings.”
For investors looking to capitalize on this opportunity, Lee highlights sector exchange-traded funds (ETFs) such as the iShares U.S. Home Construction ETF (ITB), the SPDR S&P Homebuilders ETF (XHB), and the Invesco Building & Construction ETF (PKB). Among these, the Invesco fund has been the top performer so far this year, with gains of nearly 31%, surpassing the S&P 500.
If you’re considering adding homebuilder stocks to your portfolio, now might be the perfect time to dive in and ride the wave of this seasonal trend combined with favorable market conditions. Stay tuned to Extreme Investor Network for more insights and tips on making smart investment decisions.