Today is March 7th, 2020 and as of late, we have been watching the markets react to 2 different topics making the headlines; The Elections and The Corona Virus…
What is interesting at this time is that we have had two hot topics in the headlines both nationally and internationally. With the amount of publications, online posts and free speech, there is myriad of supposed information at our fingertips relating to the two topics. The one thing to keep in mind, depending on the writer, there is a different spin on each topic.
I won’t delve into either topic too much, but what I will do explain the difference between our perception and the reality, which is what we live in and how fear can cause people to make some costly mistakes, especially when it comes to their finances.
It is 2020 and we have a mass of information everywhere around us. The problem that I see is trying to sift through what is real and what is not, which is the basis of this short read. Here is the perception being bred out there:
1) We are on the verge of a plague called the Corona Virus
2) It’s an election year and everything will fall apart
3) The stock market is crashing and long overdue
4) The drop in rates are going to cause the home prices to soar
5) The Chinese are pulling out of the US market before the bubble bursts
These were just a few of my personal favorite headlines…which is exactly what misinformation and lack of knowledge and research can lead to…a reactive market or public … which is moved by the fearful only to have opportunities to be gained by the fearless.
The reality is that this is not the economy’s first rodeo with any of these topics. Not to delve too far into these topics, but the reality is that the news and social media will take topics like these and run with them. Concerning the Corona Virus, we have been subjected to viruses that break out in years past, Sars Virus, Swine Flu, Bird Flu to mention a few. Not that these weren’t to be taken notice of, but not to the extent that is being propagated by the media, which is my point. Do the research and you will realize that.
You have the economy shifting and a health scare with the Corona Virus which is creating fear in a large portion of the public.
But, with fear, comes opportunity
As fearful stockholders pulled out, the investors that really know the breath and reality of the market waited patiently on the sidelines and as sell-offshappened, the buys began to grow, i.e. AT&T and Microsoft for a couple of stocks that were being purchased and people were making lots of money.
Number 5 on the list dealing with the Chinese pulling out of the US housing market before the bubble bursts threw me. This title will grab people, but will not hold the educated. We are not in a housing bubble AND this isn’t 2008. We have been in a growth cycle, many times called a “super cycle” which I have referred to before. This intense growth cycle can happen after a severe downturn as the “Great Recession of 2008….not to repeat myself.
Regarding the interest rates…yes they have dropped. But this interest rate drop was yet another reaction to the news….being the Corona Virus and the perpetuated publicized fears. The Fed has done this to stave off economic fears and keep the economy moving, plain and simple.
But here’s the truth, the treasury bonds have dropped even lower since the rate decrease, which throws us into a deeper “inverted yield curve”. This market is definitely an interesting one and difficult for anyone to predict, especially if you believe history repeats itself, which is not happening now.
My “belief” is that the rates will most likely go up slightly once these fears have been put to rest, media wise. Yes, they have dropped, spurring on a flurry of refinancing, but I also do not believe it will drive the home prices up exponentially . I think that home prices are stabilizing in many areas and this market is balancing as a threshold may have been reached. All you have to do is shop with buyers to know that. They almost intuitively know what is fair priced and what isn’t and they are willing to wait it out for the “right” home.
Sum It Up
I cannot predict the market, the same as the rest of us. We can only guess based on past history or what the economic analysts shore up. But it still remains that the market is very difficult to predict. What IS easy to see however is areactionary market, like we are experiencing. These do not last long and always bring opportunity with it…as it has done this round through lower rates and stock opportunities.
What this market is doing and has been doing is adjusting or rebalancing. Sonoma County has been in its own “micro-climate” mainly due to the Tubbs fire and is now adjusting back into it’s normal rhythm. We are however, still in a housing shortage, but even with that said, buyers are more savvy and willing to wait for a fair market value price on a home. The truth is that this market is very healthy and even with prices adjusting, we are getting back to a sense of normal.
My advice, as was told to me years ago was, “Always choose an Action, not a Reaction” as Actions are always well thought out. Reactions never are and are typically bred out of fear.