Skeptic On The Economy Or Will All Continue To Go Well?

Bankers at the World Economic Forum worry if good times will end

"The whole world is going up in a straight line. But for how long?" - Michael Lavelle of Citigroup. All really is looking well and has been for awhile now so it brings some to be skeptic. Not all at Davos were worrying but some defitnely are.  "Mergers and acquisitions volumes is running at a level well above the historical average. Cheap debt and sky-high stock prices give companies plenty of currency for deals."- Jenny Strasbury, Liz Hoffman, and Thorold Barker. 

Strength of the U.S. Dollar

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There was controversy last week when Treasury Secretary Steven Mnuchin mentioned he preferred a weaker U.S. dollar (as it's generally known to always prefer a strong dollar). The weaker dollar then plummeted. A weaker dollar undermines the confidence in the U.S. assets which is why precious metals rallied that day. Thus, the 10 year Treasury yield surged again (when treasury bonds fall, yields rise and mortgage rates also tend to rise with them).

I've always found it fascinating how one person with high influence can change the market but so can high speculation. The day after Steven Mnuchin's comments, President Trump said (at the World Economic Forum) that the U.S. currency would get stronger and that Steven Mnuchin's comments were taken out of context. President Trump's comments made the dollar rise almost immediately. 

This volatility in the market has caused investors to worry about the economy. All is currently going well but eventually gravity will bring the market back down. This is why I so often mention the business cycle to my clients because the timing of buying or selling a home is EVERYTHING! 

Home Sales- Best Year Since '06

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Existing home sales are up more than the last year even though inventory is still very low. This is the best time to be a seller because homes are in demand by many buyers. According to the National Associaton of Realtors, "At the current sales pace, the stock of homes on the market would be gone in 3.2 months." This is the lowest level of inventory since they began tracking data in 1999. Limited inventory on homes drives up home prices, however, all this depends on the neighborhood. 

Luckily for home buyers, mortgage rates still remain historically low. 

 

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Again, home prices will eventually come down. No one knows when this will occur but I imagine in the next couple years. Home prices won't come down as bad as the Great Recession. The collapse of the U.S. housing market wiped out approximately $11 trillion in household wealth! 

 

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Andrew Vargas