(from our Tactical from July 14th)

We continue to focus on Australian housing leading indicators to help with timing on our structurally bearish Australia outlook, set out in our March thematic Aussie Housing and Banking Boomerang.  Lower rates in Australia are leading to a surge in house prices and building permits. Higher prices and higher supply will be a toxic combination.

As we discussed in our June monthly, short-term cyclical indicators (e.g. our Australia leading indicator) are bouncing and housing market data looks to be improving.  Mortgage approvals, building permits and housing starts also continue to grow.  This continues to suggest short-term patience and to refrain from adding to short positions until housing leading indicators begin to turn lower.

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Source: Bloomberg and Variant Perception