If you’ve been keeping tabs on the market lately, it can seem a bit concerning. The Dow Jones has been plummeting, with another 464 point drop. According to an article on ABC News this is one of the worst times on Wall Street since the Great Depression. On top of that, the S&P 500 is down 10 percent too. All of these factors make it look like a downturn is on the horizon. Let’s take a look at the 2019 economic outlook.
Stock market is volatile
Currently, the stock market is volatile with drops on the Dow Jones and S&P 500. December is typically one of the best months for the market but not in 2018. In 2018, the market activity is starting to resemble the Great Depression.
Interest rates are rising
The Federal Reserve recently confirmed that they are raising interest rates. All of this has sweeping effects for American consumers.
There was a quarter point percentage increase from 2.25 to 2.5 percent. This increase has been the ninth increase over the past three years. This spike in rates can affect everything from the interest rate on your credit card to the percentage your savings account offers.
According to an article in The New York Times, this shift can be good and bad depending on your vantage point. The article states that:
“Savers and retirees seeking juicier yields will have an easier time finding savings accounts that pay more than 2 percent, a figure that looks attractive after they were starved of any interest for nearly a decade. But people trying to whittle down a pile of credit card debt, tap their home equity line of credit or purchase a car may find that it will cost a little more.”
So while you might see a slight boost in some savings accounts, if you’re paying down debt or looking to access credit, your total costs could see an increase too.
Housing prices may be on the decline
One economic indicator that could signal a looming recession is the housing market. Housing prices continue to decline and some housing inventory continues to be vacant. So what’s the deal?
According to Goldman Sachs economists, as noted in an article in Yahoo Finance, there are three main reasons why the housing market is slowing down. The article notes that:
“There are three fundamental drivers of the slowdown in the housing market, none of which are likely to soon reverse,” the firm writes. “(1) mortgage rates have increased 100bp since 2017, putting pressure on affordability; (2) house prices have grown faster than rents and incomes since 2012, exacerbating the impact of rising rates; and (3) the 2017 tax law changes reduced the tax benefits of owner-occupied housing relative to renting.”
Given these factors it’s likely we’re going to continue to see the housing market cool down from the boost we’ve seen over the past few years.
What can you do?
So for now, the 2019 economic outlook does warrant some concern. It’s not a full-blown recession (yet) but it’s something to be mindful of and prepare for now. You can start by paying down your high-interest debt and put more into savings. Do an expense audit and cut what you don’t need. Also, evaluate your risk tolerance as the market shifts and adjust your investment strategy.
If you want to make moves to access more capital before a downturn, you might consider selling your home. If your home is not so great for the market right now and would be too costly to repair, you might feel like you’re out of options.
At Sundae, we work with homeowners that have homes that may not be market ready. We offer them the best price possible, so they can start a new life. We even offer $10,000 in cash advances to assist in the process. We guarantee the highest price because we believe in the consumer and aren’t looking to just turn a profit.
Have any questions? We’d be happy to help!
Andrew is an experienced executive with expertise in finance and marketplaces. Prior to founding Sundae, Andrew was CFO at LendingHome, an online mortgage bank and prior to that, Andrew served as CFO at Airbnb. He also held leadership roles at Intuit and The Boston Consulting Group. Andrew holds an MBA from Harvard Business School.