Mega-bank JP Morgan (JPM) reported record profit of $5.7 billion in the third quarter, up 34% year-over-year . With the size of JPM and the diversity of its business lines, the company can report almost whatever it wants on any given quarter. The most salient takeaway for investors as a whole was something CEO Jamie Dimon said in the management discussion portion of the press release:
"Importantly, we believe the housing market has turned the corner. In our Mortgage Banking business, we were encouraged that credit trends continued to modestly improve... Despite this improvement, the absolute level of charge-offs remains elevated. We also expect to see high default- related expense for a while longer."
Dimon didn't exactly issue the all-clear but a steady improvement in housing would be exactly what the doctor ordered for the country. Jeff Saut, chief investment strategist at Raymond James tells Breakout he and his team made the same call early this year.
Saut is a believer in the recovery, modest though it may be. "For Sale inventories are plumbing generational lows and the affordability index is at all-time highs so, yeah, I think housing has turned," he states.
Like JPM, Saut is quick to caution that the recovery is hardly a gangbusters reversal of fortune. With the SPDR S&P Homebuilders ETF (XHB) up a stunning 45% year-to-date, he's hesitant to leap straight into the names at the moment. Whether you get long now or later is less important in the big picture. If the recovery isn't yet another head-fake housing stocks and related names are poised to continue to outperform at a steady, if no longer spectacular pace.
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