Nervousness In The Markets
Today we are discussing the nervousness in the markets over geopolitical and domestic situations. The DOW Jones has hit new highs eleven times in a row (between May and July) but last week it tapered off. This can impact your broad based portfolio and individual investments.
Vladimir Putin, the situations in the Gaza Strip and Israel have contributed to the Dow ending it’s eleven new highs in a row streak. The nervousness in the markets is really with the individual investors. Corporate America on the other hand, is showing signs of real confidence (more in the video).
Corporate confidence in the markets
We are in the middle of earnings season and half of the S&P 500 companies have published their reports. 76% of those have beaten expectations for their earnings and 67% have beaten expectations on sales. That is in line with what we’ve seen since 2009.
This week we are watching reports coming from:
- CPI (Consumer Price Index)
- Existing home sales
- Durable goods
- GDP (Gross Domestic Product)
- Personal income
- ISM manufacturing (Institute for Supply Management)
(More on each in the video)
Home sales impact on the economy
We are especially focused on the home sales reports as we’ve had several clients tell us they were sticker shocked at the appraisal on their houses. As we look at these home sales reports, they are not always lining up with our findings.
The new home sales multiplier effect
Even though existing home sales are rising nicely, new home sales are down. They dropped in June by 8.1%. There is an important multiplier effect of a new home sale. If you build a new home, three full-time jobs are created for one year. 1.5 of that is a person who is building your home, the other 1.5 full-time jobs are for products related to building that home. These jobs would be anything from prefabrication, to hardware and furniture sales.
The types jobs related to new home sales are missing from our economy because people are not building as many new homes. People are renovating or buying existing homes. This is another reason investors and consumers are nervous.
The lack of new home sales is important for investors to follow because it is starting to create a broader drag on the economy. It has a lot to do with the nervousness in the markets and with the consumer. Janet Yellen even mentioned recently that new home sales are a problem.
Also contributing to the lack of new home sales is the fact that many younger generations are saying they don’t need a bigger place. There are also those who have just paid off their homes and, after what happened in 2008, are not interested in buying a new home.
Nervousness in the markets from geo political situations
Will Rogers said, “History doesn’t repeat itself but it sure does rhyme.” 100 years after World War I we are seeing some similarities to that time. Russia is again a big player as Vladimir Putin is moving forward on acquiring more territory for Russia adding tension across the globe.
We are will keep you updated as we watch how these political situation could impact you, the investor, and our economy. We still believe there is plenty of opportunities in the market and there is no need to be nervous at this time.
fi-Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. fi-Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The Dow Jones Industrial Average measures the average price of a group of 30 high value stocks. The S&P 500 index is a measure of performance of the broad domestic economy through 500 stocks from major industries.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.