So, here we are a couple of short weeks away from market. Just about everyone I’ve talked to recently has asked me the same question: What’s my take on the upcoming market?
My reply has been consistent — I don’t have a crystal ball and even if I did, I would not trust it.
What I do know is what I do know and that is times have been hard and business has been — and I believe will continue to be — soft.
- The economy. Based on a series of recent consumer surveys, including this one from The Washington Post-ABC News poll, the majority of Americans continue to grow increasingly dissatisfied with President Biden’s handling of just about everything, from the economy and immigration to his support to aid Ukraine in its war with Russia.
And, for the record, many Americans are also expressing deep concerns about his age, especially if he plans to run again.
A recent report from CNN found that rising gas prices and high interest rates have set the stage not only for heightened economic uncertainty but have also impacted consumer confidence, or the lack of it, as evidenced by that fact that The Conference Board’s Consumer Confidence Index fell for a second consecutive month, dropping to 103 in September from an upwardly revised 108.7 the month before.
- Rising prices: Since April 2021, the cost of food prepared at home has risen by almost 20%.
Car buyers have been affected by a supply crunch, too. Car manufacturers cut production early in the pandemic and have struggled to meet demand since. A semiconductor shortage also drove up prices for new cars, which are 19% higher than in 2021.
Airline fares in the past two years have risen dramatically as labor shortages and fuel prices pushed up prices amid surging post-lockdown demand for travel. Compared with April 2021, prices are up 36%. Likewise, hotel prices are up 31%.
If one looks at consumer price index data since April 2021 to see how much more Americans are actually paying for everyday items, the cost of essentials like groceries, utilities and gas increased by 20% or more. The cost of all items on the index increased by 13% in that time.
- Mortgage rates: According to the National Association of Realtors, the average monthly mortgage (based on average 30-year mortgage rates and home prices) rose 85% in the past 19 months, from $1,212 in January 2022 to $2,246 in August.
- Housing inventory is still tight: With home values at a premium, sellers are reluctant to list their homes concerned that they may end up paying more and getting less house than they currently have. Meanwhile, new home construction has slowed resulting in fewer properties for sale while investors have been aggressively buying up available inventory.
- Student loan repayment resumes: After three and a half years, the pause on federal student loan payments is coming to an end. Payments will be due starting in October. The repayment pauses, which went into effect in March 2020, suspended some 44 million borrowers from repaying their loans. Most recently, Congress prohibited Biden from extending it one more time.
- Retailers are still top-heavy with inventory. Worth noting is that inventory was also bought at premium prices, that included record-breaking container costs. A number of retailers have made the decisions to “clear the decks” and are offering excess inventory at tremendous discounts.
- Retailers of better goods being challenged by designers: A number of retailers selling better goods are losing sales to interior designers who are offering more of a personal, one-on-one experience with consumers. Watch for a growing number of retailers to accelerate free, in-store-design services as a means to hold onto sales.
- Some domestic suppliers struggling on pricing. Some suppliers are also being severely challenged by new waves of furniture from China priced so aggressively that many domestic producers say they can’t compete. One upholstery source complained of a competitor from Asia offering a recliner with power that is retailing for $499.
So, that’s what I know, or at least suspect I know. How all of this will play at market, or impact market, remains to be seen.
But I can promise you this. As Sherlock Holmes said in the story “The Adventure of the Abbey Grange,” “the game is afoot.”