The Azucena Take: Noise vs. Reality of the Current Market
If you are hyper focused on the news then you have seen stories about how the economy is going to "crash" or inflation is getting out of control. This is not even close to reality based on the data collected and analyzed. From your novices to professionals, investors too often get duped by all the noise.
It's easy to be worried when all you hear is doom and gloom but it's not based in reality. Most of these stories are just tapping into your emotions or failing to present the facts properly.
Media Literacy
Even those who make the effort to be aware will lack the concept of media literacy. Without being able to critically analyze what is presented, you fail to notice numerous red flags. One will be unaware if there are some ulterior motives or if they are just trying to sell an unnecessary service. Also it helps to know if the writer is an actual on the topic.
Example: A financial news site has a post about how the economy is going to enter a recession this year and what you can do. However, it got your attention because the headline tapped into your emotions. The source of the information or the remedy to the problem is a service with several affiliated links in the article. Also, many of the ads being featured will benefit from what is being advocated.
If you notice those red flags then you know not to trust the article at face value. If you lack media literacy then you would have missed all those red flags.
Noise vs. Reality
If you've been following the news, it has been all doom and gloom. We have inflation and rising interest rates. There is a lot of noise about how poorly the economy is doing and fears of another recession on the horizon. Unfortunately, most of this fear-mongering is not backed by any data while its sources can only be attributed to ones emotional outlook (aka "trust me, bro!").
The reality is that the economy has been rapidly recovering following the rollout of vaccines. 95% of jobs lost to the pandemic have been recovered and it's expected that 100% of those jobs will be recovered before the Summer season ends. However; changes in demographics have created a labor shortage in most markets.
Inflation is a problem but there is a lot more to it than just prices going up. It's important to understand that inflation is a natural part of any society with a free market economy. The fear that many have about inflation has more to do with the concept of hyperinflation (which is extremely unlikely to happen given the current market conditions). Driving forces behind the ongoing inflation have been the hit to supply chains resulting in demand outpacing supply. Plus it should be noted that this crisis is not limited to the United States but most of the world.
Finally, we come to the topic of interest rates. There are concerns about what will happen if they are raised, but it helps to remember that they have been at a historical low. The highest it has ever been was at +5% before being cut in response to the 2008 Crash. They started going up again in 2016 before being slashed in response to the pandemic. Even if they jump, they will still be at a historic low of under 5%. The Federal Reserve's overall goal is to taper demand to allow supply some time to catch up, thus bringing inflation under control.
What it Means for Investors?
The big takeaway for investors is that there is more that is going on that can't be summed up with a buzzword. That is why an investor should absolutely speak to a market expert and do their own research by looking at the market. Do not waste your time with hack blogs that use clickbait titles while trying to convince you that "X" is recession-proof.
The Azucena Take provides an inside look into the investment real estate market using the research done and data collected by Marcus & Millichap