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Trends… Counter Trends… The Falling U.S. Dollar… Where to go next??? | International Residential Real Estate Investors Association
Tuesday January 23rd 2018

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Trends… Counter Trends… The Falling U.S. Dollar… Where to go next???

The economic environment is mixed.  Employment growth is weak.  Under employment is out of control.  The Fed may inject another $1 trillion for quantitative easing.   The Congress swings wildly back to the Republicans.  If you are confused, do not feel alone.  Trying to make something of the tea leaves is tough.

Typically, I focus on real estate here, but straying from that theme is probably in order given all the news.  With the dollar falling or remaining weak for sometime the results are not as unpredictable as the situation may at first seem.  What do we know?

  • Much of the European Union is in a cycle of increasing fiscal auterity and correction of the social safety net.  This places upward pressure on the currency value and products from about 700,000,000 citizens of the planet.
  • The effects of the real estate bubble and wild expectations in Dubai and this portion of the Middle East is over, but with a falling dollar the petroleum nations are winners count on strong currency growth and economic momentum from these nations. 
  • The impact of alternative energy initiatives is stronger than folks are giving credit.  So while the Middle East will boom the boom will not be wild.
  • China’s rapidly tightening rate environment, emphasis on domestic consumption, burgeouning capital investment in infrastructure and alternative energy, etc will drive imports at a disportionate rate benefiting US and the developed world’s export demand. 

Of course, this is only a few of the driving pressures in the market.  However, these are perhaps the largest impacting factors.  Considering these we can expect:

  • Commodity price inflation.  This implies increasing prices for clothing and fuel.
  • Because we produce most of our natural gas (and are enjoying strong reserve growth) the price of heating and electricity will not track directly.
  • Housing and food are less effected because most food is produced domestically.
  • Rates will fall boosting and solidifying housing values.  Construction and bank lending should strengthen for business.
  • Consumer spending growth and savings will continue to track about where we currently are.
  • Employment should get a significant boost from dollar trends and from the new congress.  Business may not know what Congress will approve but they can expect the regulatory activism to weaken sharply giving a steadier clearer business environment.

On the securities side, investors will win with internationally focused business in Europe and Asia.  Currency winners are likely HK, the Middle Eastern States, and the EU.  Also, Russia and India are likely strong winners.  The U.S. dollar move should dampen inflation pressure in some of the surging economies too giving these states more room to continue bolstering growth.

There you have it.  This is my rambling assessment of the economic situation.

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