ShareEach day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights corporate profits.
- The stock market has made a strong 14 percent gain from recent lows in early October, based on the latest S&P 500 index.
- The stock market has been volatile, but the gains of late are due to strong corporate profits and improvements to economic expansion. A stream of recent data points to GDP expanding at 2.5 percent in the third quarter, an improvement from less than 1 percent expansion in the first half of the year, and clearly far away from any new recession possibilities. However, GDP still needs to kick into an even higher gear, of up to 4 to 5 percent, to meaningfully pull down the unemployment rate.
- A higher stock market means more wealth for some American households, which thereby raises the propensity for these households to spend more. Home sales on the higher end and second home markets could get a lift if the current stock market valuation proves durable.
- For most households, however, housing wealth rather than stock market wealth is more important, and housing wealth has yet to recover. Housing wealth is also an important source of initial funding for small business start-ups. A hold-back to housing equity wealth, therefore, means a lower than normal rate of small business creation.
