Tuesday, March 25, 2008

Consumer Confidence and Home Prices Continue Slide

Consumer confidence and home prices continue their sharp declines as the stock market shrugs off the bad news today. Nothing really surprises me with the stock market these days. I guess the bulls continue to trust that Ben Bernanke will save the day. I fear the Fed will eventually run out of cards to play before doing more harm to our economy than good.

Consumer Confidence Index
The Conference Board's consumer confidence index fell to 64.5 points in March compared to 76.4 in February. This is the lowest reading in five years. The consumer expectations component of the index fell to 47.9, the lowest reading in 35 years.

S&P Case Schiller Home Price Index
According to the Standard & Poor’s / Case-Schiller home price index, the housing crisis is getting worse. Home prices in January dropped 10.7% from a year ago in 20 major U.S. cities measured. This marks 13 consecutive months of decline.

The data was ugly today. In my opinion, it is inevitable we are heading towards a recession. Perhaps your local economy is already in a recession.

How should this data impact your investment strategy? I’m not ready to call a bottom yet. While most personal finance bloggers preach a “buy and hold” strategy, I'm not convinced. I’m sticking with my large cash position and I continue to protect my capital. I abandoned the “buy and hold” strategy 7 years ago and I’ve outperformed the S&P 500 in 6 of those years.


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