Difficult to believe we’re already at the halfway point of the year! As is typical when our nation and the world for that matter is in a state of economic flux, every prognosticator, economist, media outlet and pundit paint a not so pleasant picture of the state of the union. I joke with our Chief Economist that we could string economists from one end of the world to the other and they’ll never reach a conclusion 😊 That said, here’s the numbers from the first half of 2021 for you to draw your own conclusion.
The economy expanded at a 6.4% annualized pace in the first quarter, and for all of 2021, U.S. growth is expected to increase by more than 7% and quite possibly be the strongest pace post World War II.
With a labor market in flux, it’s hard to predict with any certainty how many of the more than 7 million jobs that have been casualties of the pandemic recession will be fully recovered. Most expect things will look more normal mid to late 2022, then again, our norms are changing.
Inflation has hit 5% as of this writing and will probably continue to climb but frankly, we are truly in uncharted waters right now. I think we expected a short-term surge, but the question is how long will it last. One thing is certain, high prices are actually the ultimate correction to high prices. Meaning, when costs go up consumers pull back, then prices reset. Once again, it’s a safe bet it will be somewhere in 2022 or early 2023 before there is some version of normalcy. Supply chains were hit hard, and the cost gets passed to us.
The Federal Reserve stated they believe the afore mentioned price increases are temporary & they’ll hold rates steady until well into 2022, possibly 2023. We know they are all in and will continue to print money when needed but they are in a peculiar spot as bringing employment to full status combined with reaching price stability often conflicts. How long will they deal with inflation being above the 2% threshold is the question.
Existing and new home sales are slowing down, as summer heats up and travel picks up. Additionally, it appears buyers are now pulling back due to all the overbidding as inventory still lags far behind norms. Unfortunately, low inventory levels have pushed up prices. We expect a slowdown in house price gains over the second half of the year as many have put home shopping on hold while they let loose and travel once again.
Expect the same roller coaster ride for the market. When fears of inflation escalate, the sellers take over; and when those fears recede, the buyers jump in. Until there is some clarity, there is likely to be more of the same. One thing is certain if you are not positioned properly, you will suffer some losses. Will you be able to recover?
For and in-depth look at the factors we review to keep us ahead of market conditions, check out our full Economic Report HERE
By: Sam Ally VP of Investor Relations for HIS Capital Group www.hisfund3.com