As usual, Dr. Marci Rossell did not disappoint the more than 700 interested members and guests of CREW Atlanta and the Atlanta Chapter of CoreNet Global at the annual economic forecast luncheon on January 10th. This year’s headline: DISRUPTION!
Dr. Rossell pointed out that there are two kinds of DISRUPTION: CREATIVE and EVIL.
CREATIVE DISRUPTION (CD) primarily speaks to things we’re experiencing in technology, such as blockchain and Uber. We have come to realize, especially the older among us, that CD is inevitable, and we’d better get used to it, because it’s where we’re going in the future, like it or not!
Dr. Rossell introduced three types of EVIL DISRUPTION (ED):
ED #1 relates to financial markets, including negative rates of return in the stock market. She believes that a recession will not likely occur until later in 2019, but growth will become slower sooner than we have been experiencing, possible as soon as Q1 2019, due to negative global stock markets in 2018 and the results of lower oil prices and a downward yield curve. China, in particular, has already experienced this slowdown. In general, however, real estate was doing well.
ED #2 focused on Brexit. The date for a decision on Brexit’s future is coming soon: March 29, 2019. As Dr. Rossell stated, the U.K. has “dithered” about this for approximately two years. What has become a point of consideration is that the EU is interested in uniting politically to protect themselves from the belligerency of Russia. The EU is also open to free migration, which has not been endorsed by the U.K. Another consideration relates to the lack of concern over a negative yield curve, which is potentially surfacing in late 2019. Finally, ED #2 focuses on the current government shutdown in the U.S. The lack of payment to government workers and the divided politics that may cause real economic pain. Also, within this political discord is the fact that the U.S. is technically not being invaded, such as was the case in 1941 with Pearl Harbor or in 2001 with the Twin Towers. Therefore, there should be no continuation of a government shutdown due to no true emergency requiring the U.S. to build a wall.
ED #3 relates to the trade war with China. In particular, the steel and aluminum tariffs, among others, levied on China and the tariffs levied by China are likely to result in an escalation of rhetoric and perhaps greater tariffs going forward. Some of the goals for the U.S. may be to curtail technological transfers and protection of rights with China, plus a plan to shrink the deficit with them by half.
The bottom line from Dr. Rossell was:
Interest rates will probably remain calm until April 2019. The stock market may remain bad for three months. Also, the President of the U.S. should not use Executive Power to shut down the government if there is no valid emergency. Regardless, the news for Georgia is that we rank #19 among the most hurt states in the U.S. from the shutdown, and the fact that it costs more to shut the government down than to keep it open, per Senator Rand Paul, R-KY.
During the Q&A session, Dr. Rossell stated she did not believe there would be a recession in 2019, plus there would be no unbalancing of the real estate market during this period. Another question considered the unemployment rate being so low; however, the rate doesn’t consider wages, the volume of prisoners/unemployables and the impact of the cost of living.
Overall, Dr. Rossell’s input could have brought worse news. Many in the audience, with whom I spoke following the presentation, either were glad to hear her comments or thought she was being a tad optimistic. However, she’s the expert who has been on target in the past. Let’s hope 2019 doesn’t follow the normal cycle of a recession every 8-10 years as experienced in recent decades. Fingers crossed!
Bruce A. Kellogg, MAI, FRICS, has been in the real estate industry for over 40 years, primarily within the valuation profession and software solutions. He is currently a real estate consultant and serves on several boards and committees for both real estate and non-profits. He currently serves as Chair of the RICS U.S. Southeast Chapter and served as National President of the Appraisal Institute in 2005.
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