Here we go again…. Just three short weeks ago I wrote an article under a similar heading which led to positive feedback including relief and appreciation for the simpler things in life.
The article started,
“Trump, Comey, Mueller, Twitter, Fox News, CNN….it is all getting more than a bit chaotic. Even the stock and bond markets jumped into the fray…”
This week is more of the same, but amidst the weighty, media-driven current events several key economic news items were released with decent implications for ours and our family’s financial lives: namely HOUSING DATA and JOB NUMBERS.
These economic numbers matter somewhat for the performance of our portfolios (short-term, not long-term) but the numbers matter more for the state of our businesses (whether self-owned or as an employee) and our ability to buy or finance the purchase of a home (or second home).
Here is some of the data* (#1-5) In a nutshell, so as not to take anyone away from the Comey testimony:
- Mortgage activity recently hit a 7-year high. Back in 2010, shortly after the historic housing crisis, a “First-Time Homebuyer Credit” program was introduced by the US federal government. Since then, home prices have not only recovered, but buyers are borrowing at record levels to afford more expensive houses.
- Overall American wage growth has remained “tepid”. Tepid is a word in economics for “not great”. So that means if there is a record amount of mortgage borrowing, with “tepid” wage growth, the experts determine that home prices are overvalued (their conclusion, not mine).
- According to data, google searches for new homes has recently been slowing, BUT other data shows that new construction has been increasing. (I would conclude that more new homes with less searches…. means new home prices could start to decline ever so slowly.)
- In the job market, there is data pointing to ever-increasing “alternative working arrangements”, meaning independent contractors and temporary workers. Coincidentally, the for every 5 Americans recently hired, 3 resign. (It would seem that Americans want to work on their own terms.)
BUT recall the data above in #2 says that “wage growth remains tepid”. So, working on one’s own terms may come with slower wage growth.
- (It did occur to me that this statistic mostly to applies to the average or less-skilled worker. The highly-skilled and highly-educated will possibly always be able to work on their “own terms” eventually in life.)
- Finally, the data said that consumer credit (or “borrowing”) increased at the slowest pace since 2011; this has been attributed to weaker auto loan activity. (I would conclude that people are simply owning and driving their cars longer– even into the ground. Go Uber!)
Nothing in these numbers makes me change my long-term outlook on the markets. And the Comey testimony certainly does not matter to a long-term market outlook. Life events cause the need for portfolio changes.