There is still lots of room left to lower interest rates. Remember, a decrease from 1.25% to 1% is, effectively, a 20% decrease. That is very large, by comparison, to previous rate moves.
There is no bubble in real estate. There are "bubbles" in some key markets. For example, here in the NYC area, I can attest that prices have risen dramatically in the last 2 years. Prior to that, however, there was little movement in the previous 6. 3-5% per year, at best. That said, prices 2 hours beyond the greater NYC DMA, prices have been flat or falling, for well over 7 years, and are now slowly stabilizing.
I believe the markets will move "sideways" in a trading range of about 7100 - 9000 for the next few years. The "bottom", if you look at the last time the Dow or S&P bottomed back in the 30's, was last touched in 1982. The scale up would imply a bottom today of about 6000-6300. The market rarely drops to hit that bottom all in one time frame. In fact, the 1982 touch occurred after the sideways 70's. The 30's bottom occurred after a sideways movement after the crash. We've had our crash, now we're having our sideways moves.
The weak dollar will help, but is getting close to bottoming. It isn't really a good thing, the weak dollar that is. It helps exports, but that's it. And exports are only helped if the countries we are exporting to have cash. Many don't. Best to grow organically, at home.
So that leaves interest rates. You don't need to use low interest rates to build. There are many other ways to use them. Such as cutting payments. Personally, I've been able to lop a substantial sum of money from my monthly payments, take a tiny bit of equity from my (equity heavy, even still) home, and do work. So, in essence, I'm "building", though it's really upgrading. Many companies are doing the same.
Why has this earnings season been so "good"? 2 reasons - vastly lowered expectations (smart) and very good use of savings from interest rates (smart). I have seen very few excellent sales figures. But the first step in every sales recovery has been improved cost/interest savings, followed by improved earnings, followed by spending.
It will, indeed, be a long time before we have the kind of growth we saw in the late 90's, but that was a very unusual confluence of events. Usually those types of entrepreneurial events occur every 4 generations. Gotta wait another 60-odd years to see something like that again.
In the meantime, productivity management will allow growth to return, though at more manageable levels. |
