Our capitalist Macro economy has been cyclic since the U.S. was a country. Booms are followed by busts, expansions by recessions. The height of an expansion becomes “the good old days” when nostalgically recalled during the following recession.
It’s not surprising that “these are the good old days,” since both the Federal Reserve and Congress pumped $trillions of monetary and fiscal stimulus during 2020-2021.
https://www.nytimes.com/2022/05/10/business/economy-boom-tim…
For Tens of Millions of Americans, the Good Times Are Right Now
Their houses are piggy banks, their retirement accounts are up and their bosses are eager to please. When the boom ends, everything will change.
By David Streitfeld, The New York Times, May 10, 2022
This has been a time of great financial reward for a large number of Americans.
For the 158 million who are employed, prospects haven’t been this bright since men landed on the moon. As many as half of those workers have retirement accounts that were fattened by a prolonged bull market in stocks. There are 83 million owner-occupied homes in the United States. At the rate they have been increasing in value, a lot of them are in effect a giant piggy bank that families live inside…
There are 22 million U.S. millionaires, Credit Suisse estimates, up from fewer than 15 million in 2014…In the last six years, prices have risen by the total value of all housing in 2000, according to the Case-Schiller index. People own much more of their homes than they used to, while the banks own less. In many areas of the country, it has become practically impossible for renters to buy a house…
Households have more cash than debt for the first time in decades, which is theoretically good. But all that money is encouraging spending, which is propelling inflation, which is forcing the Fed to push up interest rates. The result: a recession late next year… [end quote]
I love the “golden mean” because it’s stable and predictable. Extremes cause the pendulum to swing.
The next 12 months will be a good time for investors who profit from volatility. Everyone else should plan for ways to shield themselves from the predictable outcomes of this unique Fed-caused recession – rising interest rates, falling stock prices, job loss.
If you have an adjustable-rate mortgage, consider locking in a fixed-rate mortgage now. Even though mortgage rates have already risen significantly, they could go higher as they did in the late 1970s- early 1980s.
Wendy