May 20, 2023 | Consumers, Housing Market, Investing and Should you Pay off your Mortgage?

Smart Investing with Brent & Chase Wilsey

Consumers
Based on retail sales it looks like the consumer is softening, but I would not say to problematic levels. In the month of April retail sales rose 0.4% compared to last month and were 1.6% higher compared to last April. One problem here is these sales do not adjust for inflation and with inflation increasing 4.9% compared to last year, it appears most if not all of that gain can be attributed to higher prices for goods and services. While the headline number looks soft there are still areas where the consumer remains extremely strong. Food services and drinking places saw an increase of 9.4% compared to last year, health and personal care stores were up 7.9%, and non-store retailers had a gain of 8.0%. With grocery prices remaining high, food and beverage stores also saw an increase of 3.7% compared to last year. Areas that received a covid boom continued to struggle as furniture and home furnishing stores saw sales fall 6.4%, electronics and appliance stores saw sales decline 7.3%, and building material and garden equipment and supplies dealers saw sales decline 3.7%. The biggest negative in the report was gasoline stations as sales fell 14.6%. Overall, it appears the consumer remains in a good spot. They just aren't spending as much on goods and would rather spend money on travel and dining out.

Housing Market
Existing home sales continue to remain under pressure as in the month of April they fell 3.4% compared to March and were 23.2% lower than April 2022. There are several factors which are likely contributing to the pressure which include higher mortgage rates, challenging affordability, and an extremely tight inventory picture. At the end of April there were only 1.04 million homes for sale. This was a 1% increase compared to last April, but at the current sales rate it represents a 2.9-month supply. Generally, 6 months is considered a balanced market. The affordability challenges have really hurt the first-time homebuyer and in the month of April they made up just 29% of sales. Historically, they are around 40%.

Investing
Over the last few weeks, the markets and equities have seemed to go nowhere. They go up for a few days and then go back down for a few days. This can be very discouraging for investors who get impatient and then settle for a 5% T-bill. Over the last 12 months institutions have pulled $333.9 billion from stocks and over that same period, individual investors have pulled $28 billion. As of May 10, 2023, money-markets reached a record in total assets of $5.3 trillion. For patient investors they will be rewarded, could be next week, next month or three months from now. By the time some people realize it, they will have missed perhaps a 5 to 10% increase in their portfolio. Don’t forget what Warren Buffett said, “investors should be greedy when others are fearful." I will add to that, a good dose of patience helps as well.