The US housing meltdown and credit crunch, which brought a swift end to an investment bonanza earlier this year, is likely to give Wall Street a stiff hangover this year, market strategists say.
A flurry of private-equity-fuelled buyouts and corporate takeovers helped propel the Dow Jones Industrial Average to an all-time high of 14,164.53 points in early October, but the Dow has swooned since then as the housing downturn has worsened.
Investment strategists said the housing slump, now almost two years old, and a related credit squeeze that has triggered multibillion-dollar losses at some of America's biggest financial firms, may temper stock market advances this year.
"Growth has clearly slowed in the fourth quarter in the US," said Legg Mason Global Asset Allocation president Steve Bleiberg.
Bleiberg said the overriding concern for US investors in the coming 12 months would likely be the health of the credit markets and whether companies would be able to tap fresh capital.
Credit flows have tightened because big banks have lost billions of dollars in mortgage-related investments, which has forced them to curtail lending and triggered efforts by central banks to boost liquidity.
Overseas stock markets have also been singed by the pullback in US shares as foreign investors had also gorged themselves on US mortgage-backed securities during the housing market's boom years.
Some analysts believe the housing and credit woes could destabilise the wider US economy, or even trigger a recession, which would further depress Wall Street sentiment.
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