Gaza, Ukraine and Your Investments
As the global economy becomes increasingly interconnected, it’s fair to wonder how major events in far away parts of the world may impact the markets at home – and your investments. This is an especially delicate question in light of the recent Israeli-Palestinian crisis, as well as the ongoing Ukrainian conflict.
Both events have the potential to dampen U.S. consumer confidence and corporate investment if they continue for an extended period of time. On the other hand, several recent economic data releases signal a healthy and growing U.S. economy.
Last week, existing-home sale data for the month of June showed an increase at an annual rate of 5 million more homes, the highest pace since October 2013. According to the National Association of Realtors, these results are helping to “push overall supply towards a more balanced market.”
Because the vast majority of homes sales are resales rather than new construction, this figure is a particularly telling indicator of the health of the overall economy. Consumers shopping for homes will likely stimulate current owners of distressed real estate — property acquired after the 2008 crash — to sell off their holdings, helping stabilize the market.
The Consumer Price Index (CPI), which produces monthly data on changes in the prices paid by consumers for a basket of goods and services, was also released last week. The most recent data showed a 0.3 percent increase in June, adding to the 0.4 percent gain during May.
A positive change in price generally indicates excess consumer demand — because suppliers will only raise prices if they expect customers to be able to pay more. This means that the economy is steadily improving. With inflation now increasing at an annual rate of 2.1 percent, the Fed may also speed up its withdrawal from the quantitative easing (QE) program.
The takeaway for individual investors is to continue to monitor data releases for signs of continued growth. Consult your financial advisor to determine the best way to position your retirement portfolio in light of the recent bull market.