Just when financial advisors were starting to feel comfortable again, with clients opening their wallets and bank accounts and testing the investment waters once more and with production figures rebounding nicely, comes news that some key indicators are heading south again.
First and perhaps most worryingly, there’s home prices -- a key factor in consumer confidence and ultimately on bank ledgers -- which are now clearly headed into a dreaded “double dip” downturn now. Then there’s joblessness, which appears to be stuck at about 9%, with little likelihood of any relief there.
If that weren't enough, there's also bad news on the consumer confidence front.
The nationwide Case-Shiller Housing Index, the most-watched barometer for housing prices, has declined for eight straight months after turning positive briefly last summer. Since the housing bubble burst in 2006, home sales prices have plummeted even more precipitously than did during the Great Depression in the 1930s.
Home prices today, adjusted for inflation, are back to 1999 levels, according to David Blitzer, chairman of the Index Committee at Standard & Poor's. Many analysts are now predicting home prices will continue to slide this year for a total drop of 5%, before hitting bottom sometime early next year.
Meanwhile, the jobs engine that usually kicks into gear at the end of a recession has been sputtering. The U.S. Labor Department’s latest weekly report for the last full week of March showed 420,000 new unemployment claims filed. That marks the seventh week in a row that new unemployment claims have topped 400,000 claims -- a level that suggests there is little chance that nationwide employment levels will be improve anytime soon.
Not surprisingly, consumer confidence, as monitored by the Conference Board, is also slumping, dropping in May to 60.8 from 66 in April. Many economists had been predicting that the figure would tic up to 67 in May. A figure of 90 is considered a sign of a healthy economy.
"Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects," said Lynn Franco, director of The Conference Board Consumer Research Center. She said fears over inflation, which eased in April, had picked up again in May.
With all that bad news, advisors may find it hard to keep clients in an investing mood, especially with bears warning that the markets may be topped out.
Nouriel Roubini, co-founder and chairman of Roubini Global Economics, who in 2006 famously predicted the financial meltdown that ensued a year later, is warning that markets are headed for a correction which he says will “increase risk aversion” among investors.
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access