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6 Month Forecast
Only a lonely few prognosticators in the housing or stock markets are venturing a projection for the 6 months ahead. Why? It seems 6 months covers the next Presidential election and the unknown timeline of the first Covid 19 vaccinations.
Clouding the 3 month and 6 month outlook is the aforementioned housing market where a tsunami of evictions and continuing plague of rent defaults threatens. There is a level of volatility, uncertainty and a departure from old statistical trends, that makes stock market outlooks seem sketchy. Yet if you’re a stock market investor, potential stock investor, home buyer, or employer, you need to be keying in on the core of economic paths.
Time passes quickly and the fall season of 2020 is just ahead. Halloween might be the appropriate symbol.
Negativity Reigns Supreme
Most near term predictions on the web and social media are very dour, and almost none promote a positive outlook. Based on that alone, you’d wonder how a 6 month forecast could contain anything positive. But maybe there is no up or down trail to follow, and we just have to live with all the factors and carve an investment and business path among the economic and social debris?
Certainly, smart business owners and entrepreneurs will be seeing this low point in the economy, in the next 6 months as a launch pad for 2021. Survive 2020, position your business for the upcoming growth in the new economy, and you’ll have played this as good as any smart person can.
It’s not microeconomics and monthly stats, but rather, science, politics, and social will that are the big factors now.
I forecasted a w shaped recovery 4 months ago, and the experts forecasted a V shaped recovery. Just understanding human nature, an out of control virus, and massive employment dislocation means a V shaped recovery is unlikely.
Lately some are talking about the double dip, yet only the election and a Covid 2nd wave could do it.
Democrat resistance, propaganda and political sabotage have been persistent factors heading toward this fall’s election. By damaging the economy, some Democrats hope it will be enough to win the fall election. The damage done by the riots and the Memorial Day beach and drinking crowd shows how influential the media and social will is.
The Covid 19 outbreak could really catch fire in October, as people head indoors and as kids go back to school and bring the virus home to their parents. This fall season situation is most worrisome.
President Trump now is gaining a reputation among many Americans as “the bringer of poverty”, something he is totally clueless about. He has 4 months to remedy this additional public relations problem.
And the permanent loss of jobs, small business shutdowns, bankruptcies, and evictions hasn’t even been priced into the housing market or stock market as yet. Continuous business shutdowns in Texas, Arizona, California, and Florida, who have shown no signs of controlling the outbreak’s rising costs will darken the 6 month outlook.
If aid is curtailed to airlines, cruise lines, hotels, manufacturers, real estate investment firms, big restaurant chains, , city transit services, and bailing out bankrupt cities, you can imagine how this will reverberate through the economy and stock markets. New York is in big trouble. Big aid to big business has kept the stock market afloat so the stock market could crash if the Fed gives up and the President can’t keep sending them cash.
How Will the Housing Market Hold Out?
Right now, the housing market recovery is on a tear. If it wasn’t for the housing shortage, the growth outlook from here forward would be upward. Housing experts forecasted big growth for multifamily, and of course the exact opposite has happened in that that sector. Not a good guess.
Instead, new home construction is the big trend. However, condo and apartment sales are still okay given the fact there’s no where else to live.
With the coming eviction crisis, forecasts are for falling housing prices. A tech slowdown in the Bay Area could see rapid housing value declines there, and in New York, the exodus and rent failure combine to create crash conditions.
Of course, NAR’s latest housing market stats show a healthy market and new home sales are hot.
Real estate is seen as a much better investment and more first time buyers are jumping in. The $5 trillion in the money markets could move to the home purchase markets, thus stimulating banks, consumer sales, and fueling up new home construction. This could raise the outlook for the next 6 months and next 3 years.
The Last 6 Months of 2020
Interestingly, both the election and vaccine might turn out to be non-events. Trump may win again whereby the economy would likely recover slowly. And the Covid 19 vaccination might not even be realized (however, a few vaccines from Moderna, Pfizer and Astrazeneca do look like they will be successful).
If the vaccines are produced, it won’t be till next spring until people are vaccinated.
Generally, economies, housing markets, and stock markets all trend downward as winter approaches. But this winter might be different. It could possibly regain upward momentum going into 2021 as most economists have forecasted.
There is a lot of cash in the system and a vaccination would definitely launch major consumer and business spending including new home purchases and travel. A vaccine is the cure.
If a successful vaccination happens, it’s a big boost for the economy going forward and the most rosy of outlooks happens. So the vaccine companies are the key to it all.
Standard Outlook: Recovery in 2021
But the economy could also crash. In fact, even the housing market with its low mortgage rates and vicious shortages of housing stock, and rising new home construction growth could come to a shuddering halt if the Democrats win this election and no vaccine appears.
The Democrats are anti business and pro tax, and that will see investors sending their money out of the country fast as the value of their holdings plunge, and as the US dollar plunges much faster than it is right now.
conference board gdp forecast
Voters May not Care About China’s Danger
And there is no certainty that President Trump can do much with the economy either. His talk about stopping imports from China has largely failed for the last 3.5 years. Manufacturing growth in the US has been disappointing and the imports continue. US exports are poor and now the domestic economy is struggling. Without further major stimulus, the outlook is dire.
And going into the election, one of his biggest promises has evaporated. Tariffs don’t get rid of the trade deficit problem, and China is boasting economic growth.
The Democrats on the other hand, have never said anything negative about China’s communist leaders even though they launched the pandemic, invaded Hong Kong, have enjoyed decades of American technology theft, and taken advantage with special trade status and a ridiculous $500 billion yearly trade deficit with the US.
Yet voters have tired of the President, show no interest in the deficit, supply threats, or International trade, and may be willing to vote for anyone to replace him to then let them do as they please.
That is the precursor of economic disaster.
Pandemic Completely Out of Control?
And with State and city governments refusing to comply with President Trump’s erratic messaging, it could catapult the fall season pandemic spread into the biggest single US event in 80 years. However, the President is now increasingly okay with using face masks. Not quite a solid vote for Covid 19 pandemic eradication.
The key questions economists and reputable journalists are asking is whether Federal funding can continue and whether the Corona Virus pandemic will sweep across the full union like wildfire.
With respect to the Presidential election, a Trump win would keep an emphasis on reopening the economy and supporting its growth. A Biden win means a return to higher taxation, more China imports, slow reopening, more business and housing regulation, and a war with angry Republican voters.
The bombed out ship the Democrats want to take over, could have nothing left. During November, voters might realize the Democrat’s intentions are not worthy, and Trump could get another last minute election win.
The Coming Fall Flu Season
With respect to fighting Covid 19, the matter is ominous. As the fall disease season approaches, young people are spreading the virus like there’s no tomorrow. That means more shutdowns will likely occur by November, which won’t be good for the business friendly Trump. Trump is an economy, business profit and jobs president and without those, he is unwanted.
Logic then tells us a Biden win is in the works unless President Trump gets smart and begins talking about Covid 19 control, safety, the job losses to China, increased taxes and regulation threat, the threat of rising interest rates, inflation, and the stoppage of new home building along with other Biden weaknesses.
This means all the problems we have now, will be worse in December with out of control Covid 19 infections.
The Prognosis for the Fall
The ever pessimistic Goldman Sachs economists reduced their third-quarter US GDP growth outlook from 33% down to 25%. And they’ve raised their full-year loss projection for 2020 from -4.2% to -4.6%. They forecast 8% growth in the fourth quarter.
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