Monday Money Report 11.11

The major market indexes all set new record highs last week, with the S&P 500 briefly topping the 6,000 mark. The Federal Reserve Bank, or Fed, cut interest rates another quarter of a percentage point. This week we’ll see the release of both CPI, or Consumer Price Index, data, and retail sales information as the holiday shopping season starts off.

As inflation continues to drop, unemployment remains low, and the market continues to rise, it looks as if the economy is doing great. And it is – at a macro level. When we look at things overall, we have thus far avoided a recession and major job losses. Mortgage rates continue to remain stubbornly high, as those are tied more to the interest rate on a ten-year Treasury Bond than the prime rate set by the Fed. For some time now, the yield curve has been inverted, meaning longer duration bonds have been paying lower interest than short-term bonds. As that begins to flip, and normalize, we see mortgage costs stay the same or even increase.

But if the economy is doing so well, why does money feel so tight for so many people? If the economy writ large is macroeconomics, household cash flow is microeconomics. Particularly in this area, housing is expensive compared to other places, and higher mortgage rates aren’t helping. Inflation drove up consumer prices, especially for food. While overall wages have increased, individual families are still feeling the increased costs. Add in childcare or activities, the rising costs of cars and health insurance, and it’s no wonder many Americans feel as if the economy is not good.

While you’re in the daily grind of working, raising kids, and trying to save for retirement and college, it can feel as if you’re falling behind, or will never get ahead. Many of us are actually doing quite well, even if we don’t see it. A majority of people’s wealth is often in retirement accounts and home equity. I recently heard it called phantom wealth. It’s there, but you don’t really see it. What you see is your paycheck and your bills. But behind the scenes, those automatic contributions to your retirement plan and the slow build-up of equity in your home add up.

I’d encourage you to do the same with your emergency savings, travel fund, or other goals. Make small, automatic payments to build balances over time, preferably to an account you don’t regularly check.

Your action item this week is to talk about holiday spending with your family and friends. Consider alternatives to excessive gifts, like a fun activity or Secret Santa