Residential investment subtracted a significant 3.4 percentage points from GDP from 2006 to 2011 but has added marginally to growth in the last three quarters of 2012. From a portfolio perspective, we focus on housing because of the risk and opportunities it creates for growth, and for the central role it plays in Federal Reserve decision making. We conclude that ongoing foreclosures will continue to put downward pressure on house prices, but that valuation levels will contain the downside and eventually lead to stabilization and even price gains in regions with healthy economic growth. Furthermore, because housing's overall impact is likely to be neutral to positive for the economy in terms of containing inflation, we see the bottoming process as supportive of stocks.

David Fuller's view Readers may be interested in the two unusual and informative graphics on housing in this issue of The Weekly View.

As I see it, the headwind from the US housing sector is slowly diminishing but is unlikely to be reversed while negative equity remains a significant factor. The Weekly View also addresses this saying:

Currently, $2.8 trillion in mortgages is borrowed against 11.1 million underwater properties, according to CoreLogic.

A problem that we are now seeing in the UK, which has a weak property market beyond London where it is supported mostly by a large influx of foreign buyers, is that mortgage rates have bottomed and are edging higher despite ongoing QE from the Bank of England. Presumably, it is only a matter of time before mortgage rates turn somewhat higher in the USA, assuming that the gradual economic recovery remains on track.

Nevertheless, Fullermoney did not join the bearish consensus forecast of a double-dip (or worse) recession for the US economy over the two previous years, largely because of three factors: 1) the Federal Reserve's QE; 2) exports by America's Autonomies to the world's growth economies; 3) the boom in shale gas and oil on private lands, despite indifference from the White House.

Technical evidence from the S&P 500 (weekly & daily) and other US indices remains consistent with a cyclical bull market, supported by the August 2011 to yearend base formation. This is currently experiencing a well-earned consolidation following 2012's strong performance to date. Share indices in most other countries show broadly similar patterns.