Minnesota Mortgage Blog

Europe is working on a comprehensive plan to address long-standing government debt and banking problems and that is good news according to our markets. Coupled with better news on our own economic front and a few strong early earnings reports, the stock markets have enjoyed a strong rebound in the past two weeks which has brought the indices close to break even for the year. That is the good news. However, we are not out of the woods yet. Europe’s plan does nothing to reverse the weakness of the European economies and we will continue to have a drag upon our economy as state and local governments pare down their workforces with the Federal Government likely to join the party after our own government’s debt plan is announced. We will also have to endure more intensive in-fighting as we near the November deadline to strike a deal on the debt plan.

Looking beyond these potential roadblocks, we again emphasize that our economy is not slipping into recession and is not likely to do so save a worsening of the situation in Europe or another unforeseen catastrophe. In the past months, the markets were priced for a greater risk of a recession with a steep drop in stocks, oil prices and rates. Now that this pricing is being removed, you are seeing a rebound in these markets. It does not mean that the markets will continue in this direction as the pricing adjusts back to a "slow recovery." It will take better economic news for that to happen. However, if we theoretically remove the threat of recession, there is no reason for the economy not to continue to heal slowly but surely. And if it does, the opportunities for low-rate bargains on houses and cars may also fade away. We can’t predict when this will happen, but we do know it will happen at some point and if you are a potential buyer, you don’t want to get caught behind the curve.