Good Financial Reads: Current Events and Trends (Part Two)

This week some clients have expressed concern with the recent market volatility and impasse in Washington D.C.  Although the debt ceiling debate may have been delayed to mid-December, we expect continuing conflict and choppy markets through the end of the year. We understand the underlying worry that comes with market fluctuations and wanted to take the opportunity to share our thoughts with everyone.

This week, the monthly Case-Shiller index of home prices in the United States logged its biggest year-over-year increase in the index’s history, dating back to the late 80s. Home prices were up an astounding +18.6% June vs. prices in June 2020. The increase was higher than what we saw during the housing bubble of 2004-2006. In our view, these surging home prices are a warning to consumers.

The last several years have seen incredible concentration in stock market performance. Big tech stocks such as Google, Apple, Facebook, Amazon and others have largely powered indexes higher, while other stocks fell behind. This was especially the case in 2020, as investors rushed to “hide” in these supposedly safe stocks. Yet through the first 9 months of the year, we’re finding that 2021 stock market performance is broadening out nicely.

Supply disruptions and higher prices have marred the post-pandemic world. Despite assurances from authorities and economists that these effects are “transitory,” the fact remains that they’re bad and not getting better soon. With Christmas 2021 shopping on the horizon, this becomes an even bigger issue. Store inventories are lean and ships delivering Christmas goods are stuck in ports. Of all the years NOT to procrastinate with your Christmas shopping, this is the year. Shop now for Christmas before it’s too late!

“It is an unquestionable fact that about every ten years there occurs a vast and sudden increase of demand in the loan market, followed by a great revulsion and a temporary destruction of credit.” John Mills, On Credit Cycles and the Origin of Commercial Panics (1867).