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Conclusion: Case-Shiller has hit an inflection point as improvement slows and the rise in the Swiss Franc may be signaling bad news for the Euro Zone.

Sometimes a picture is worth a thousand words.  In that vein, we have two pictures that we want to share this morning that highlight a couple of important, even if unrelated global macro trends.

First, the Case-Shiller data from this morning.  This data showed that prices rose for the third straight month in June and pushed prices up 4.4% on a year-over-year basis for the full quarter.  The second quarter data, obviously includes a benefit from the tax credit, so should be viewed with some reservation given that  the recent housing data has turned quite bearish (See our note on 8/25/2010 entitled “Where Are The Housing Bulls Now?”).  Most noteworthy though, was the June data was actually the first time that year-over-year increases declined sequentially in 16 months.  That is, the rate of improvement in home prices slowed in June from May.  This point is highlighted by the red arrow in the chart below.

Two Charts: Case-Shiller and Swiss Franc - 1

Second, we want to highlight the rapid rise in the Swiss Franc versus the Euro.  In the course of three weeks, we have seen a ~7% appreciation of the Swiss Franc versus the Euro.  Traditionally, this would be considered a safety trade as Switzerland is considered to be a nation that is well capitalized and has solid financial reserves versus the rest of Europe.  The last time the Swiss Franc saw such a rapid move was May and June of this year when European sovereign debt concern was at its frenzied peak.  Interestingly, the media seems less focused on Europe but the markets, as is evident in certain credit default spreads and the strength in the Swiss Franc, appear to be foreshadowing a renewed focus on issues in Europe and for the Euro.

Two Charts: Case-Shiller and Swiss Franc - 2

Daryl Jones

Managing Director