It is interesting. For years we have gone through a very slow recovery from the recession. Yet the stock market has kept moving up each year for over five years with few interruptions. And now that we seem to be on the verge of gaining economic momentum, the stock market is acting like it needs to take a breather, a correction or something more severe. Why the glum news at a time we should be celebrating? There are plenty of theories. Perhaps the stock market may just need a breather which it has earned. Perhaps it is a "sell on the news" phenomenon. Other theories include the hypotheses that the markets are worried about events overseas or investors are afraid interest rates will rise soon because of the good economic news.
We have had plenty of bad spells in the past five years and the stock market seems to bounce back up each time. On the other hand, if it is a true correction, we have to say that the stock market has earned a breather after five strong years. What is also interesting is that oil prices and interest rates have fallen significantly in tandem with stocks. Lower oil prices are not typically the norm when we have a war going on in the Middle East. And rates should not be lower when the economy starts to accelerate. In this respect, lower rates could be another indication of global concerns.
The truth is that we rarely have markets moving where they are expected to move. Nor can we predict whether any of these numbers will hold. What we can tell you is that lower gasoline prices and lower interest rates are both good for the economy in the short run. Thus, if the economy is about to accelerate, a lower stock market may actually be adding fuel to this recovery. For now we will enjoy the good news regarding rates and oil prices while hoping that stocks are just experiencing a well-deserved rest.
Mike Ervin
Branch Manager/Mortgage Loan Officer
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