This isn't "the sky is falling," but I'm trying to understand what the heck is the growth spot in the economy over the next 0-5 years? I'd like to see + hear some data/opinions if you have any you'd like to share.
My observations in no particular order:
The white collar job market is not healthy; most of the "were hiring" stories you hear about are for low paid gigs. Personally I have a few friends who have been unemployed for almost a year, so that contributes to my pessimism (since they're all pretty solid workers in previous growth fields). But the data also supports this.
Commercial real estate has been extending terms for a while waiting for a recovery that isn't actually arriving, and their mortgages aren't getting any smaller... There's certainly not any booming investment in CRE office.
Private equity saddled with several trillion dollars of portfolio companies they can't unload which are purchased with leverage on leverage on leverage; their limited partners are anxious to get their money back... the current solution seems to be write an executive order making people's 401k's a honeypot for bad valuation deals that PE needs to get rid of.
Artificial Intelligence: hit a pretty significant road bump that doesn't have an obvious path forward to fulfilling investor (or user) expectations. Llama4 and GPT5 are both examples. That isn't to say the craze is over, but it could well be a catalyst that causes a recalibration in people's expectations and investments. TBD.
Manufacturers have tariffs to contend with and will eventually have to trim costs or boost prices to deal with it; in no case can that be considered a positive thing
Inflation risk is omni-present
The IPO market is still in the toilet
Homebuilders for most of the market (ex high end) can only sell new houses with big financial incentives and hurling discounts at people, which has dropped profitability
Existing housing market has decidedly flipped, with the national data showing it takes longer to sell and for lower prices. There's some geographic variation, but on the whole it's in favor of buyers.
To save money lots of people have switched to DIY rather than paying laborers; prioritizing $ over your time is usually a tightening sign
I know some will argue this point, but from the data I see the aircraft market is also a lot weaker than the numbers show. Listings sit for a long time.
Restaurants are feeling pinched with consumers cutting back
The boom/bust pilot cycle is not booming
The boom/bust energy cycle is not booming
The boom/bust real estate cycle is not booming, unless you're building data centers
Gov't and healthcare employment accounts for over half the job growth over the last 3 years, and that growth engine is dead (no judgment on that, it's just a fact)
Student loan payments are in the toilet, with delinquencies having increased substantially despite fewer people actually being in a payment phase of the loan
Last but not least, we're >35 trillion in federal debt -- and with fed independence in jeopardy. There is no situation where this could be considered a positive development.
Here's the only bright spots I see:
If you're part of the military complex, you're doing great. War is good for business and the recent budget bill gives you a hefty piggy bank boost to play with.
If you're lighting venture capital investor money on fire to build a GPT wrapper, things are great until you have to re-raise.
If you're in the construction or real estate biz building data centers, you're doing great
If you build semiconductors or semicap equipment, you're doing great
If you have your 401k in speculative/growthy assets, you're currently doing wonderful (but that's not the economy, that's the fickle equity markets)
But to me, by all accounts, the underlying economy does not seem great. It seems like... pretty not great?
Random bits of data:
The "gen z kids can't get jobs because of AI taking the entry level jobs" narrative doesn't really hold, based on the age distribution. It's just a crappy market all around.
Also worth noting that the south/sunbelt is getting hit the hardest for housing, after also having a big boom.
Auto market. The subprime submarket (not broken out here) is at all time high delinquencies, that's even including the 2007-2010 disaster.
Car affordability has been getting worse for a while now.
Consumer sentiment is bad.
Jobs:
And existing jobs (note this is ADP, not the BLS numbers which are subject to substantial revisions):
Homes:
Still at record unaffordability. So sure your house is climbing in value on paper, but can it sell? And the answer is it depends, but for many people it's often not for the price you think it can.
Also worth noting that we're seeing a record rate of home purchase cancellations.
As for new homes (Lennar is not unique): """Stuart A. Miller, a chief executive of Lennar, one of the nation’s largest residential builders, said on a June call with analysts that the company had offered incentives of more than 13 percent of a home’s cost in the second quarter and that it would continue focusing on “lower cost structures.” That’s more than double the normal incentive rate, which Mr. Miller said on a March call should be around 5 or 6 percent."""
My observations in no particular order:
The white collar job market is not healthy; most of the "were hiring" stories you hear about are for low paid gigs. Personally I have a few friends who have been unemployed for almost a year, so that contributes to my pessimism (since they're all pretty solid workers in previous growth fields). But the data also supports this.
Commercial real estate has been extending terms for a while waiting for a recovery that isn't actually arriving, and their mortgages aren't getting any smaller... There's certainly not any booming investment in CRE office.
Private equity saddled with several trillion dollars of portfolio companies they can't unload which are purchased with leverage on leverage on leverage; their limited partners are anxious to get their money back... the current solution seems to be write an executive order making people's 401k's a honeypot for bad valuation deals that PE needs to get rid of.
Artificial Intelligence: hit a pretty significant road bump that doesn't have an obvious path forward to fulfilling investor (or user) expectations. Llama4 and GPT5 are both examples. That isn't to say the craze is over, but it could well be a catalyst that causes a recalibration in people's expectations and investments. TBD.
Manufacturers have tariffs to contend with and will eventually have to trim costs or boost prices to deal with it; in no case can that be considered a positive thing
Inflation risk is omni-present
The IPO market is still in the toilet
Homebuilders for most of the market (ex high end) can only sell new houses with big financial incentives and hurling discounts at people, which has dropped profitability
Existing housing market has decidedly flipped, with the national data showing it takes longer to sell and for lower prices. There's some geographic variation, but on the whole it's in favor of buyers.
To save money lots of people have switched to DIY rather than paying laborers; prioritizing $ over your time is usually a tightening sign
I know some will argue this point, but from the data I see the aircraft market is also a lot weaker than the numbers show. Listings sit for a long time.
Restaurants are feeling pinched with consumers cutting back
The boom/bust pilot cycle is not booming
The boom/bust energy cycle is not booming
The boom/bust real estate cycle is not booming, unless you're building data centers
Gov't and healthcare employment accounts for over half the job growth over the last 3 years, and that growth engine is dead (no judgment on that, it's just a fact)
Student loan payments are in the toilet, with delinquencies having increased substantially despite fewer people actually being in a payment phase of the loan
Last but not least, we're >35 trillion in federal debt -- and with fed independence in jeopardy. There is no situation where this could be considered a positive development.
Here's the only bright spots I see:
If you're part of the military complex, you're doing great. War is good for business and the recent budget bill gives you a hefty piggy bank boost to play with.
If you're lighting venture capital investor money on fire to build a GPT wrapper, things are great until you have to re-raise.
If you're in the construction or real estate biz building data centers, you're doing great
If you build semiconductors or semicap equipment, you're doing great
If you have your 401k in speculative/growthy assets, you're currently doing wonderful (but that's not the economy, that's the fickle equity markets)
But to me, by all accounts, the underlying economy does not seem great. It seems like... pretty not great?
Random bits of data:
The "gen z kids can't get jobs because of AI taking the entry level jobs" narrative doesn't really hold, based on the age distribution. It's just a crappy market all around.
Also worth noting that the south/sunbelt is getting hit the hardest for housing, after also having a big boom.
Auto market. The subprime submarket (not broken out here) is at all time high delinquencies, that's even including the 2007-2010 disaster.
Car affordability has been getting worse for a while now.
Consumer sentiment is bad.
Jobs:
And existing jobs (note this is ADP, not the BLS numbers which are subject to substantial revisions):
Homes:
Still at record unaffordability. So sure your house is climbing in value on paper, but can it sell? And the answer is it depends, but for many people it's often not for the price you think it can.
Also worth noting that we're seeing a record rate of home purchase cancellations.
As for new homes (Lennar is not unique): """Stuart A. Miller, a chief executive of Lennar, one of the nation’s largest residential builders, said on a June call with analysts that the company had offered incentives of more than 13 percent of a home’s cost in the second quarter and that it would continue focusing on “lower cost structures.” That’s more than double the normal incentive rate, which Mr. Miller said on a March call should be around 5 or 6 percent."""
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