In the elections the other week the economy was huge, it was also the main discussion point in many of the meetings I attended, I heard from NAR's chief economist Lawrence Yun, a cheif editor from Forbes, and pundits Tucker Carlson and Paul Begala.
The general consensus was that it's a long haul ahead, there's no quick answers and don't look for overnight changes. Generally speaking here's the big things to look at over the next few years:
1. Expect continued unemployment for 2-3 years at least. No one was optimistic that unemployment would dramatically improve anytime soon. While there are positive gains in private sector hiring it won't make a major impact like many would hope for.
2. Businesses and banks are sitting on tons of cash but refuse to spend it. It was reported that nationally, US businesses are sitting on $3.5 trillion dollars (soon to be $4 trillion) and are just sitting on it rather than injecting cash into the markets by boosting corporate spending or making hires. The only one "spending" right now is the government and that trend is due to wind down now due to the shift in leadership at least in the house.
3. Consumer confidence is sitting low but showing some recovery, Lawrence Yun said that if consumer confidence can continue to grow that could trigger some more business spending - if that happens growth could be more robust, but until then it's going to be slow.
4. Banks are going to get more heat than ever before this year to lend money, if they actually follow through remains yet to be seen.
5. Gridlock in congress could be a good thing, Tucker Carlson said that, "The dumbest ideas coming from DC usually emerge when one party rules all of the branches." He went on to reference that regardless your political ideology you can point to a time in DC when "the other party" had complete rule and made real dumb decisions. What gridlock is meant to do is spur cooperation in decision making, which is what the founding fathers wanted, cooperation and middle-ground.
6. Globally things are very vibrant, and that will help the US. Global activity and spending will boost GDP which will help knock down our massive defecit (to some extent).
7. Speaking of defecit, it was unanimously agreed by the speakers that the defecit must be tackled first and foremost. It's not popular but somehow taxes need to go up and spending needs to go down. The government needs to get back onto better track or else things could get real bad.
8. Inflation concerns are growing, especially after the Fed has injected $600 million into the market. The move by the Fed came with mixed reviews, some saying it was needed since the banks are refusing to do it, others saying it's just going to have bad long-term effects with inflation. A lot of the speakers were hinting that in 18-24 months inflation could start creeping into our market.
9. Some silver lining is that more market-savvy investors are seeing massive opportunities and preparing for a strong recovery. The speaker from Forbes Magazine said that people like Warren Buffet making the bold moves they are today is showing that they recognize this is the "bottom of the market" and a strong recovery is on its way.
10. Furthermore it was pointed out that a double-dip will not occur, according to all who spoke. Housing has recovered after a pre-warned big dip after the tax credits expired, gold is strong, GDP is recovering, growth is slightly up, unemployment is not dropping anymore. The slow recovery is in effect and a double-dip does not seem to be a concern right now.
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So overall it's a mixed bag, some good stuff, some bad. I was hoping for more overall optimism, and didn't get that. However the message was clear that prices and rates we're seeing today are going to go away within the next year or so. People looking to take advantage of this market and who have the power to do so should be taking action now.
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