Sometimes taking a risk, is the safest thing to do

Welcome to the Skeptical Investor Newsletter. A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.

Today’s Interest Rate: 6.87%

(👇.10% from this time last week, 30-yr mortgage)

Today, we’re talkin’ total market update, sans trade/tariffs (I think we are all a little tired of that subject). Pessimistic news and tumbling stock market got you down? Stop hitting refresh on your Robin Hood account for a moment and tune in. You can’t do anything about it anyway. 

As the old Hank Williams song goes: “The interest is up and the stock market’s down and you only get mugged if you go downtown…” and when you panic about the economy and do something stupid you will regret. 

Instead, fellow Skeptic, you can protect yourself. 

Let’s get into it.

The Weekly 3 in News: 

1. Zillow turns bear, projects that U.S. home prices will fall -1.7% between March 2025 and March 2026. Last month, Zillow said home prices would rise this year. Uncertainty is pervasive and self-fulfilling (Zillow). 

2. Stocks turning Bear, down close to 20% from the January highs (AP). 

3. Surprising demand resilience for housing: Despite high rates, housing demand is up, with existing-home sales 4.2% higher MoM, driven by increased inventory and steady buyer interest. April 24th is the next existing home reading, and will be telling (NAR). 

The Pulse of Our Shared Prosperity

The economy, in a capitalist society, is a fragile dance of opportunity, aspiration and execution. And when someone or something rudely cuts in, that delicate balance is disrupted. 

This may or may not be the case today. 

Unfortunately, we often identify economic problems - including the dreaded R-word - in hindsight. Data is lagging, and it takes time to collect and analyze. Many economic indicators are untrustworthy, often showing conflicting or mixed signals that are difficult to filter. Plus, for some reason, human psychology resists acknowledging downturns until they’re unmistakable. 

In an era of fractured certainties, let me offer this with precision: I do not think we are in a recession, nor do I think we are headed for one… 

…Yet. (I’ll let you know, if I can resist my biology). 

We are far more likely, even if uncertainty persists, passing through a fleeting moment of adversity, fraught with: gross political turbulence, pessimistic sentiment and - perhaps - slower economic growth. But growth nonetheless. 

What does exist is heightened risk, because the state of affairs could completely change tomorrow, to the up- or downside. The unique attribute about this political environment is: execution happens rapidly, no matter how you judge it. It’s an interesting time to be alive on this cosmic molten stone, that’s for sure.

Are we headed for or entering a recession? I’m quite skeptical. Up until now, the worry has been the opposite of recession, an overheating economy and inflation. 

And it bears mentioning, recessions happen all the time (again, not saying we are headed toward one). It is not the end of the world and is healthy for a thriving long-term economy, much like small fires are beneficial for a thriving forest.

Markets run in cycles. And the thing about both bull and bear markets is, they are self-fulfilling flywheels. Negativity can rapidly set in, even if it’s not warranted. Remember, 2/3 of GDP is consumer spending. If the consumer starts to get too pessimistic, that eventually starts to really matter. After all, one household’s spending is another household’s income.

We have been in quite the bull market for quite a while. Now we have a correction in the stock market. Will this proliferate to the economy? 

Here is the stock market with stock markets, recessions are marked. 

And home prices, again with recessions marked. 

Recessions and economic slowdowns happen. And the world keeps spinning, especially here in the US. Just keep everything in perspective. 

Ok, let’s look at some numbers. 

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Plus, act now and get 30% off!!! Use my special Skeptical Investor Amazon link 👉. Go Vitamix! 

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Ok, back to business.

Positive Economic Indicators

Coming off the all-time highs in January, the stock market is close to hitting a true Bear Market (-20%) today, after last bottoming April 7-8. (the tech-heavy Nasdaq has entered a Bear Market). 

Was this the bottom of the market correction? Could be. Or maybe we retest those lows but IMO we have seen the worst reaction from markets, barring a new surprise of course. 

Labor Markets Holding up Well

Unemployment doesn’t look bad at all, labor is still scarce, and job quitting has normalized to historic levels. Last week, jobless claims came in at 215,000, a decrease of 9,000 from the previous week. The 4-week moving average was 220,750, a decrease of 2,500 from the previous week's average. 

Job openings remained robust and largely unchanged at 7.6 million from the previous month, with some increased separations seen in government employees. Job openings are still above pre-pandemic levels.

Perhaps the rate of hiring could slow from here, but again, so far so good on the labor front. 

Consumers are spending at a higher clip than last year. Retail sales were up again last month. 

Inflation is still trending down, both core and headline. 

Total industrial production is still holding up, positive YoY. 

Wage growth is still at historic levels, and is more than 1% higher than inflation. This is very positive, in my view. The trend looks down, but I view this as normalizing, not concerning. We are way above pre-COVID levels. 

Lots of positive data out there as you can see. 

Negative and Mixed Economic Indicators

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