Memorial Day weekend and the official kick-off to summer is finally upon us. Making it even sweeter is that we finally saw a pause in the relentless selling pressure this week. The stock market appears to have found a near-term floor, and the sectors that have been “oversold” had a nice bounce over the last several trading sessions. Famed market prognosticator Jeremy Siegel of the Wharton School of Business indicated over the past week, that he believes our financial markets are most likely within 5% of finding a “bottom”. A sentiment that seems to be gaining traction with others in the economic world. I will reiterate that I don’t believe we are out of the woods just yet. However, seeing the S&P Index touch “bear” market territory, down just over 20% for the year at one point last week, then gain back 5-7% is a good sign. I wouldn’t say that this is a new trend just yet, but an encouraging sign for sure.
The housing market continues to show signs of cooling in some areas and that evidence was furthered over the past week as weekly mortgage applications dropped another 1.2%. This may not seem like much of a drop, but this number has been declining for several weeks now. There was also mention of a continued uptick in housing inventory as sellers rush to list their homes before the slowdown increases continues. The Federal Reserve released the minutes from their recent meeting and in those notes, it clearly states their intention of raising rates by 50 basis points at the next several meetings. The cost to borrow will only go higher from here and that is creating this sense of urgency for sellers to move quickly and buyers to lock in mortgage rates before they move higher. I also read an article outlining the struggles on the retail side of things. Many of the big box retailers like Walmart, Target and Best Buy are also seeing an increase in certain inventory items. This will likely lead to more discounting in the months ahead which may help offset some of the inflationary burden consumers continue to struggle with.
Personally, I don’t view these issues as bad or warning signs. I view these as normal economic ebbs and flows, especially given our current backdrop. In the near future we will likely see some “real” interest being paid to us in our savings accounts (finally!). Investment options like corporate bonds, CD’s and other similar instruments will likely become attractive alternatives once again as rates move higher. That will be a refreshing change from our experiences over the last several years. I will welcome these new opportunities with open arms. We closed the week on a high note, breaking a 7-week losing streak and rebuilding some confidence. I’ll mark that as a win.
As we head into the long weekend, I will pose a few more thoughts for you to consider. Despite our current challenges and divisions, this is an amazing country and is still the beacon of hope, prosperity, and freedom for the rest of the world. I would like to thank our clients, families and friends who fought to protect these basic freedoms we all share. We are all fortunate to live here, in this amazing country.