December 27, 2016.
In our 30 years of writing this economic commentary, the one constant we can say about the economy is change. And there is no doubt that the rate of change has accelerated over the years. We had a huge housing boom just over 10 years ago, followed by a severe recession and a slow, steady and long recovery which has lasted almost eight years. This recovery started excruciatingly slow and was buoyed by record low interest rates. But the length of the recovery has resulted in great progress over the long-run — witness an unemployment rate that has moved from over 10% to just over 4.5%, plus close to 15 million jobs created and record stock prices.
That does not mean we are all the way back. With close to 10 million jobs lost during the recession, when you average the amount of jobs added since the start of the recession, we still have a long way to go. So where do we stand as we enter the new year? The one thing we can guarantee is that there will continue to be change. Even before the new President has taken office, we have seen a solid stock market rally and higher interest rates. So that means that the markets are anticipating change as well. The reaction says that the markets are anticipating a stronger economy and that would translate into higher interest rates.
But what we must remember is that this reaction is based upon anticipation, not reality. For example, the markets are also anticipating fewer regulations and major changes in legislation. Assuming this anticipation comes to fruition–we still don’t know the final format of these changes in laws and rules. For example, will there be tax reform and will this affect the deduction for mortgage interest? It is way too early to tell. We can conclude that we presently stand a lot stronger than we were eight years ago, and we are moving in the right direction. We will see additional change shortly, but it will be some time until we know what this change will look like and how it will affect the economy. If only we could predict the future.
Source: Origination Pro