5 Signs of an Ugly Summer for Stocks

3. Europe

I won’t belabor this other than to just give you a bulleted list of headlines you can click through if you feel like:

• Bank of Spain says nation stuck in recession in second quarter of 2012
• Italy’s bond rate skyrockets past 6% on contagion fears
• World’s top trade insurer stops underwriting Greece businesses for fear of default
• After austerity failed, Ireland applies for a $85 billion EU-IMF bailout
• Even Germany needs “structural reform” to tackle its debts

Fun stuff, huh?

4. Election-Year Politics

5 Under-the-Radar Dividend Divas

Mitt Romney has all-but-officially locked up the presidential nomination, and you know what that means: Now, instead of a mildly abrasive primary, we’ll get a full-on Super PAC assault from both sides.

We’ll be exposed to the joys of Mitt “Job Killer” Romney, a Plutocrat hack artist from Bain Capital who was the scourge of working America and pleases only his wealthy friends on Wall Street! Or worse, Barack “Job Killer” Obama, who bailed out his union buddies in Detroit and is bankrupting America, thanks to an 8% unemployment rate and a plan to tax the rich!

Wait … how can both candidates have the nickname “Job Killer” you ask? Well, because these campaigns are about winning, not making sense.

Expect nothing but ugly ads to run between now and November. Either it’ll be Mitt talking about how screwed our economy is, or Obama talking about how we need to nuke Wall Street.

Either way investors lose.

5. Housing … Still!

So, maybe you haven’t noticed, but mortgage rates are at historic lows. I’m talking 3.7% for a 30-year fixed mortgage. It’s like free money, considering the rate of inflation … but where are the buyers?

Here’s another fun bulleted list for you:

• Pending sales droped 5.5% in April, worst fall in a year
• There are 1.4 million foreclosed homes on the market
• Housing permits recently hit a 15-month low
• The Case-Shiller index of major metropolitan home prices declined once more in March, and some regions like Chicago saw the lowest home values in decade
• One out 3 Americans has an “underwater” mortgage

Academics love to talk about the stock market’s “wealth affect” by convincing Americans that things are looking up or looking grim based on the movement of the Dow. But in recent years, the housing market has been equally compelling — if not more so — because it’s so tied to the American economic outlook.

In short, if housing starts to flag again this summer, the market and consumer spending will soon follow.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace??.com or follow him on Twitter via @JeffReevesIP.