The Best of All Worlds?

The past several years have been anything but ideal with regard to the economy and lifestyle of Americans. We started with a deep recession which included a collapse of home values which were increasing at an unsustainable pace. The way out of the recession was anything but painless. It was slow and tedious at best as the recovery has felt like we were running in slow motion. However, as slow as the recovery has been, it has proceeded over all obstacles and there were plenty of obstacles from natural disasters to political issues and world conflicts. Steadily the recovery plowed ahead.

The two bright spots of the recovery have been stocks and interest rates. We have experienced record low rates for years while the stock market has continued to advance from the depths of the recession. One reason for the success of stocks has been the existence of low rates. For many investors, the returns of leaving money in cash made little sense since there was little or no rate of return with rates so low. Meanwhile, it was assumed that rates, as well as oil prices, would increase as the recovery started "heating up." Thus far, this has not happened. Rates and oil prices have not risen in 2014 even as we have recovered from our latest natural event -- the harsh winter of earlier this year.

As we move into the last phase of 2014, does this mean that we could actually enjoy better times than we thought as the economy moves to the next phase? It may be too much to ask for continued advances in the stock market while still enjoying low rates and stable oil prices -- at the same time that unemployment is dropping towards normal levels. But it is possible as long as the economy does not heat up too fast. The key is economic growth. If the recovery does not roar ahead, but advances at a moderate level for the foreseeable future, perhaps inflation does not become a problem and rates will stay low. So the best of all worlds could be possible and would be a welcome break from the malaise we have experienced for the past several years. Even if only for a short period of time, that would be a nice thought.

Mike Ervin
Branch Manager/Mortgage Loan Officer
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