Making Sense of Market Chatter
Stocks Up/Down, Rates Up/Down -- What Matters?
Bordered by the beautiful setting of the Teton Mountains, Federal Reserve Chairman Powell today made three important observations:
- The US economy has experienced steady growth for 11 years -- unlike many other countries in the global economy.
- The unemployment rate has fallen to lows that make the idea of "full employment" possible, opening up work opportunities to segments of the American population that previously had few options and experienced chronic unemployment.
- Inflation rates have been stable for years.
Things are pretty good. We are in the middle of what some call the "New Normal" and the Federal Reserve's challenge is to help maintain the momentum. Trade tensions loom as a risk that can disrupt growth trends. In Michigan, where the auto industry still has significant influence on the economy, we understand the risk potential. So do the financial markets, which gyrate in reaction to the latest policy battle -- and watching such volatility can give you whiplash. If you have financial investments, track the trends with the understanding that, when we mute the noise, the overall direction is what counts. If the trend direction shifts, take notice.
So -- what does this mean for real estate? Generally, continued growth translates into stable, or slightly rising values. Typical property depreciation (aging mechanicals, wear and tear) may exceed inflation-related property gains, so maintenance is key to holding property values. On a local level, better employment prospects for residents of lower-income neighborhoods may boost demand for starter homes in that area, while the uncertainty of trade-related plant openings and closings may disrupt both residential and commercial values in affected communities.
Real estate, like politics, is local and focused on tangible results.