Mortgage Mess Affects Stock Market
The stock market made gains last week, rallying toward the end. But starting out this week it has been much slower. The culprit? Yahoo Finance reports that comments on the mortgage mess are to blame:
Fed Bank of Boston President Eric Rosengren said in a speech that he was concerned that home foreclosures might worsen as overall economic growth slows. Meanwhile, San Francisco Fed President Janet Yellen labeled growth in the final three months of the year as being “only very meager” and warned that housing problems could “spill over” into consumer spending.
Right now, mortgage industry related stocks, from banks to brokerages to the financial services industry are being downgraded. Investors are concerned about fundamentals, and even last week’s much-hyped Citigroup deal can’t really hush the worries over the way things in the mortgage industry, and the financial sector in general, work.
Additionally, stocks in home-related products, such as home improvement companies and other consumer spending, are likely to be affected by the mortgage mess. And efforts to fix the problem by the government have resulted, so far, in two solutions that are not wowing many. HR 3915 may be helpful on some levels, but it is aimed more at assuaging the fears of investors. The same is true of information about the mortgage fix that the Treasury Department and the mortgage industry is expected to unveil tomorrow or Thursday.
While these solutions may act as a band-aid on the financial sector, the fact of the matter is that fundamentals may be shifting. So short-term investors may see some benefit, but in the long run, the measures proposed will only cover up the problem until this cycle is over. Then in 5 to 7 years, if nothing changes fundamentally, the issue will come up again.
Tags: mortgage mess, mortgage industry, home mortgage loan, mortgage blog,
mortgage fix, investing, stock market
