Did You Know?

DID YOU KNOW? At yesterday's Compass/Bank Of America meeting, BOFA Chief Economist Michelle Meyer provided a great summary of the US economy worth sharing:

  • It’s all about the FED. 
  • We are in the 10th year of the business cycle, the longest ever. 
  • Business cycles don’t end because of old age, they usually do so because of vulnerability or shocks. 
  • The only shock right now is the trade wars. This could shift the entire global mentality of our economy if they continue or expand. 
  • Confidence is down. 
  • Domestically oriented components are strong. Slightly weaker but strong. International markets are not as strong.
  • The US consumer is super strong. 
  • Unemployment is strong. 
  • Housing shows some areas of price stretching, mostly on the west coast. Pricing in some areas may be a little too inflated.
  • The backdrop is solid for housing. 
  • The economy still has room to grow still for the next 6-12 months.....except for the trade wars. They are a cloud over the economy.
  • The upcoming G20 summit may reveal an agreement or direction to a resolution. 
  • So far most consumer goods have avoided tariffs....if that changes, all could be different.
  • We are in the midst of the crosshairs. 
  • The Fed watches all this closely. Chances are rates will be cut to offset any risks imposed by tariffs. September is likely, possibly sooner. Low interest rates bode well for the housing market.
  • The 10-year treasury rate is down 50% compared to a year ago. 
Watch the following indicators:

  1. The Labor market. Job creation is key. Last month showed dramatic slowing. Was it just a single month blimp?
  2. Wage growth shows the ability of the consumer to spend. 
  3. What are the market signals? Right now stocks are high and bonds are low. The yield curve is inverted, indicating the bond market believes a recession is imminent. 
Key takeaway: The last recession was unusual in that it affected the ENTIRE US housing market. Today, with much more banking and lending regulation the chances of that repeating are lessened considerably. Housing 'recessions' are much more localized based on local economies and supply/demand.

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