The podcast discusses the current state of the economy, including the bull market, low unemployment rates, and decreasing inflation. It also covers topics like real estate drama, increasing insurance costs, and the rising costs of new construction homes. The podcast highlights the massive lawsuit against the National Association of Realtors and the reasons behind the rising cost of car insurance.
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Quick takeaways
The stock market is experiencing record highs, with the S&P 500 and Dow Jones reaching new records, indicating a strong bull market and positive news for investors.
Unemployment remains low at below 4%, marking the best unemployment stats in 50 years, giving the Federal Reserve leeway to keep interest rates high and control inflation.
Inflation appears to be under control, with consumer prices rising at a manageable rate and improving consumer sentiment, although still below historical averages.
Deep dives
Record Highs in the Stock Market: S&P 500 and Dow Jones
The stock market is experiencing record highs, with both the S&P 500 and the Dow Jones reaching new records. The S&P 500 set five consecutive days of new record highs, closing above $4900. The Dow Jones closed above $38,000 for the first time. This is significant as it indicates that the market is firmly in a bull market by both definitions, 20% above the most recent low and reaching a new record high. This is positive news for investors, with rising stock portfolios and growth in retirement accounts.
Low Unemployment and Central Bank Meeting
Unemployment remains low, below 4% for 23 consecutive months, which are the best unemployment stats in 50 years. The Federal Reserve (Fed) recently concluded its first meeting of the year, keeping interest rates unchanged. The strong economy and low unemployment give the Fed leeway to keep interest rates high and control inflation. Despite the high interest rates, the economy has shown resilience, with consistent job growth and robust economic growth. The economy grew at 3.3% in the last quarter and 4.9% in the previous quarter.
Inflation and Consumer Sentiment
Inflation appears to be under control, with consumer prices rising 3.4% in 2023. Core inflation, excluding food and fuel, was at 2.9% in December. While still above the Fed's target rate of 2%, it shows significant improvement from peak inflation of 7% in 2022. Consumer sentiment about the economy is also improving, with sentiment currently at its highest level since July 2021. However, sentiment is still lower than historical averages, although it has been rising consistently across age, income, education, and geographic categories.
Housing Market Trends
The housing market experienced a decline in home sales, particularly existing homes, in 2023, while median home prices reached a record high. With mortgage interest rates predicted to drop below 6% in 2024, demand for homes may increase, potentially leading to further rise in prices. The cost of new construction homes has also increased due to rising material and labor costs, which may contribute to the rising prices. Additionally, the National Association of Realtors (NAR) is facing legal challenges regarding commissions and access to the Multiple Listing Service (MLS), leading to the emergence of a competing organization called the American Real Estate Association (AREA).
Car Insurance Costs and Market Enthusiasm
Car insurance costs have risen significantly, due to increasing costs of vehicle maintenance and repair, as well as higher rates of vehicle theft. Car insurance premiums often lag behind the rising costs, leading to higher rates for consumers. However, market highs and strong economic growth can boost enthusiasm for investing and entrepreneurship. Rising markets and consumer confidence can encourage additional contributions and investments, while high market levels can provide individuals with the confidence to start businesses and offer goods and services.
#486: By every definition of the word, we’re in a bull market.
The S&P 500 hit record highs for five consecutive days last week, and remained strong throughout this week.
The Dow is above 38,000 for the first time in history.
Unemployment has stayed below 4 percent for 24 months, marking the strongest employment in half a century.
And consumer sentiment, which reflects more pessimism than the data warrants, is showing signs of improvement.
The Fed met this week and decided to hold rates steady, as expected, but there are hints that they’ll start dropping interest rates within a few months.
Inflation isn’t yet down to the Fed’s target rate of two percent, but it’s getting closer — with one notable exception. Auto insurance has skyrocketed; across the nation, car insurance is 17 percent higher than last year.
Meanwhile, a shake-up in the real estate industry is creating tumult for the National Association of Realtors, which is facing its first serious challenge in 100 years. The outcome could determine how steeply you’ll have to pay when you sell your home.
Where do we go from here? What’s next for the economy? We tackle these questions in this First Friday podcast episode.