In the eight-plus years that this bull market has spanned, the number of “I never thought I’d see that again” moments has continued to pile up. One of the first important ones was back in 2010 when the S&P 500 approached the “pre-Lehman’ levels of 1,250. The psychological boost from trading back to that level couldn’t be understated as it signaled a return to normalcy in the market. We first approached the pre-Lehman levels back in April 2010, but then markets pulled back on one of the seemingly annual bed-wettings over Greece, so we had to wait another eight months until December of the same year before actually getting over the hump.
Another big notch in the belt of the bull came in the Spring of 2013 when the S&P 500 notched a new all-time high, surpassing the previous peak from October 2007. After all the scars of New Century Financial right through to Wachovia, Merrill, Lehman, and AIG, the market was finally able to put the past behind it and move forward to a new frontier. Back at those lows in late 2008/early 2009, when people were literally taking money out of the bank out of fears that they may not open tomorrow, there was no one who would have ever thought that US stocks would be at new all-time highs early on in the second term of President Obama. Two years later, the Nasdaq also made a new all-time high, hitting levels not seen in over 15 years.
This week, it was the homebuilders’ turn. While the highs from 2005 are still a ways from here, the stocks of homebuilders all broke out to ten-year highs yesterday. That’s a phrase that hasn’t been uttered in more than ten years! And they did it in unison. All three stocks that make up the S&P 500 Homebuilder group – DR Horton (DHI), Lennar (LEN), and Pulte (PHM) – traded at decade highs Wednesday.
Truth be told, there is still more for the homebuilders to do before all-time highs are actually made. To get back to levels seen at the Summer 2005 peak, the homebuilders still need to rally more than 60%. However, the fact that these stocks were able to rally in what has recently been slowing housing data has been impressive. In fact, the latest releases of Building Permits, Existing Home Sales, New Home Sales, Homebuilder Sentiment, and Pending Home Sales have all come in weaker than expected. When it comes to the recent trading of the homebuilders, are they trying to tell us something or just plain oblivious?