According to Fundstrat, a reliable seasonal trend on Wall Street is poised to emerge, supported by strong fundamentals that may drive a rally. Tom Lee, Fundstrat’s head of research, indicated in a note to clients dated October 17 that the firm is establishing a six-month “tactical overweight” position in the homebuilding sector. This period capitalizes on a robust seasonal pattern where homebuilders typically experience a rally from late October to late April. Since 1999, this sector has averaged an 18.7% gain during these “golden six months,” compared to an average decline of 2.3% outside this timeframe, as per Fundstrat’s data. Although the historical reasoning behind this trend is not clearly understood, the fact that it coincides with a cycle of interest rate cuts by the Federal Reserve could provide additional support for homebuilders’ stocks, as noted by Lee. He mentioned, “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.” Lee highlighted three sector exchange-traded funds (ETFs): 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 this year, with a nearly 31% increase, outperforming the S&P 500. Homebuilder stocks have already seen significant rallies this year.
