In the summer of 2013, a sharp spike higher in interest rates caused by the "taper tantrum" (fear that the Fed will soon end monetary easing) reduced both housing affordability and the opportunities to lower mortgage rates through refinancing.
The year 2015 may yet produce solid returns for investors in US stocks. However, it's looking more and more likely that TINA ("There Is No Alternative"), more than any other factor, will be responsible rather than strong earnings growth.
Wherever you stand on the political spectrum, I think there are some undeniable truths regarding our economy that need to be addressed before we reach the next phase of robust and sustainable economic growth.
There are many positive signs in the US. Gross Domestic Product (GDP) for the 3rd quarter was up 5% on an annualized basis compared to the 2nd quarter (adjusted for inflation).
Surging stock prices will likely increase rather than decrease the costs of saving for retirement for most folks. Why? Because most people, including baby boomers who are inching closer to "retirement age", remain vastly underprepared for retirement.
Three makes a pattern so, with inequality at the top of the news - be it about champagne wars at the House of Lords or the inherent privilege of white males on the streets of America - it is time to have a conversation about the difference between privilege and patronage.
For an economy heavily dependent on consumer spending, this is not a trivial consideration.
The median household income in 2013 was only slightly above that reported for 1995 (after adjusting for inflation), while costs for necessities like housing (rent), health care, and education are making it much more difficult for middle-class folks to get by.
Using inflation-adjusted numbers, we indexed each component of GDP to 4Q07 levels, beginning with a value of 100 for each. We graphically display the results below, followed by some commentary.
I've argued for some time that the process of deleveraging has yet to run its course. The aggregate level of debt in our economy currently stands at a record high, even though many pundits continue to say that debt levels are much more manageable now as compared to the pre-crisis days.
The drop in oil (and corresponding drop in energy stocks) is causing much consternation throughout the investment world because it is inconsistent with the narrative articulated by most economists.
The growth of the American and global economies are the underlying drivers for most all equity investments. A clear discipline, dogged research, and dispassionate assessment are an investor's best friends.
Remember, markets go down from time to time, and it's normal. Cool heads and steady hands make money over time.
Technology seems to have solved the trade execution issue, so I don't foresee an overwhelming market shutdown. Fidelity now offers an amazing 1 second trade confirmation guarantee.
I want to buy a house. Would you be willing to loan me $250,000 for 30 years at 4.25 percent? Your answer is crucially important. Before you answer, keep in mind that you will be taxed on the interest you receive.
So what are the causes for optimism with regard to future earnings power? Well, the most notable are probably the recent sharp decreases in interest rates and gas prices.