“TGIF 2 Minutes” was never meant to simply report current events. Rather, my intent is to highlight topics in personal finance – or a current topic – that affects your financial life and decision-making. BUT (there is always a “but”) certain pieces of news affect our mindset – both positively and negatively – and if I can comment on how to avoid letting the news sway you too far either way financially-speaking, then I believe it worth commenting!
ECONOMIC TIMES ARE GOOD! This week the revised U.S. GDP report (the key measure of economic growth) revealed a strong, strong US economy. There is a reason I am mentioning this news as it relates to our mindset for making all sorts of major spending and savings decisions – decisions for us, our families and businesses in the short-term and longer-term.
Alongside this positive news were recent reports of:
- Soaring US corporate profits
- Strong consumer spending continuing months of strong gains
- Rising household income (these are national averages)
- Soaring consumer confidence (consumer spending is more than 2/3 of the economy)
- “Healthy” levels of inflation
- Continued solid business investment
…the list was long. These reports must have been the basis one week ago for US Federal Reserve Chair Powell’s positive assessment heard worldwide that “the US economy is strong.” OK, that is great news!
For fear of “ignorance can be bliss” I highlight a report that also came out this week to the effect of “…average home prices in major metropolitan areas of the U.S. have slowed for three consecutive months.” Recent housing data reveals:
- Existing-home sales have fallen for four consecutive months
- Homes under contract unexpectedly fell in July
- Home builder stocks have been weakening gradually since late January
- The US Fed flagging the possibility of weakening in the housing sector
Of course, with gradually rising short-term interest rates from the US Federal Reserve – and reports for rising rates to continue for the intermediate-term future – home buyers may have already begun their caution or called off purchasing new homes. Keep in mind, however, that housing – especially affordable housing – is said to be somewhat scarce. This scarcity could be part of the cause of the falling home sales data. But the data is the data.
All this gets me to my point about “buying straw hats in winter” and our current mindset – which in most cases is fairly positive, even carefree. The “straw hats” expression alludes to an awareness that good times come and go – and that it is a heck of a lot easier to make tough decisions in GOOD times than it is in the middle of a crisis.
This coming Labor Day weekend is all about celebrating the contributions that workers in the US have made to “the strength, prosperity, laws and well-being” of America (per Wikipedia). Underneath that celebration are our daily lives of spending, saving and investing. We are faced daily with decisions on what cash to allocate where – Spend it? Save it? Buy a new house? Buy needed insurance? Buy a new car? Invest in our business? Go on vacation? Live for today? Save for tomorrow? Spend to address a crisis? Spend to celebrate together?
Most Americans, including my readers, will have a 3-day weekend to ponder all of these questions in an enjoyable setting. Take the time while “the gettin’s good” over the coming weeks and months to think through both the good and more challenging times to come. Most of all, Happy Labor Day weekend!