Financial experts see an overheating economy amid rising rates in the housing market — as Warren Buffet’s favorite metric even predicts a CRASH and a recession coming.
- Donald Trump’s economic boom could quickly turn to bust as financial experts say a recession is possible
- Stifel Chief Economist Lindsey Piegza told CNN Monday Wednesday that the
housing market is throwing up a very large red flag
- Berkshire Hathaway boss Warren Buffet even predicted a possible crash, based on his own stock market metric, the ‘Buffett Indicator’
- Trump’s economic policymakers insisted the robust economic growth marked in the April-June quarter will maintain its pace but few economists outside the administration agree with that assessment
- There is also concern that the trade battles pursued by Trump could endanger economic growth over time
Financial experts say Donald Trump’s economic boom could quickly turn to bust and that rising rates in the housing market indicate an overheating economy.
Stifel Chief Economist Lindsey Piegza detailed her concerns Wednesday during a segment on CNNMoney Markets Now with Richard Quest.
The housing market is throwing up a very large red flag in our opinion, suggesting that maybe this four percent gain that we saw in the second quarter is not sustainable, Piegza told Quest.
Home sales have actually been on the declined for five of the past six months. and also, one of the biggest concerns is that as we’re seeing whole price appreciation continue to rise, incomes are very stagnant. Piegza added:
We’re seeing a growing divide between the cost of a home and the ability for the average American to afford that home purchase. We are not there yet… but eerily similar to what we saw leading up to the housing crash.
Berkshire Hathaway boss Warren Buffet even predicted a possible crash, based on his own stock market metric, the ‘Buffett Indicator.’ The metric is at an all-time high, according to the chart seen on MSN Money.
The indicator shows that at
nearly 149%, the total market cap to GDP ratio has never been higher. It’s even higher than the 145% peak we saw during the dot-com bubble, according to the report.
Earlier this week, Trump’s top economic policymakers insisted the robust economic growth marked in the April-June quarter will maintain its pace.
Policymakers also said that Trump respects the Federal Reserve’s independence despite his condemnation of the central bank for raising interest rates.
We as an administration absolutely support the independence of the Fed, and the president has made it clear that this is the Fed’s decision, Treasury Secretary Steven Mnuchin told Fox News Sunday. He said Trump’s critical statements
are really more just comments saying as interest rates are going up, it’s something that the president has a concern about.
The Fed isn’t expected to announce a rate increase when its latest policy meeting ends Wednesday. But the central bank is widely anticipated to set the stage for tightening credit again in September for a third time this year and then to likely raise rates again by December.
The Fed has raised rates twice this year in response to strong growth, low unemployment and a slight rise in inflation.
Trump has taken credit for that growth, and 10 days ago he criticized the recent rate increases, warning that they could slow the economy’s advance.
Criticism of interest rate hikes by the Fed, which is politically independent from the White House and administration, is something no president has expressed publicly in more than two decades.
I don’t like all of this work we are putting into the economy, and then I see rates going up, Trump said in an interview with CNBC.
The rate increases are intended to prevent the economy from overheating or inflation from accelerating too sharply. But higher rates make borrowing for homes, autos and credit cards more expensive — an unpopular consequence for consumers.
The market expects interest rates to keep going up, Mnuchin said.
So the only question is how far and for how long? And we think the Fed will be very careful in managing the economy.
The latest snapshot of the economy issued by the government Friday showed an energetic 4.1 percent annual growth rate in the second quarter, the fastest pace in nearly four years. Trump and administration officials have declared that the gains are sustainable and will only accelerate.
But few economists outside the administration agree with that assessment. There is concern that the trade battles pursued by Trump could endanger economic growth over time.