NAMPA – Inflation in 2022 has piqued investors, and for some, the Federal Reserve’s response — raising interest rates — has piqued them even more.
“I’ve been banging my head against the wall all year trying to make sense of what the Federal Reserve is doing right now,” Jack Manley, global markets strategist for JP Morgan, told the crowd attending the Nampa Chamber of Commerce Fall Luncheon Wednesday. He said the Federal Reserve is “mishandling policy.”
But regardless of Manley’s view, he acknowledges that interest rates are as high as they have been in a decade and will likely have risen again in December, he said.
Manley and other speakers at the luncheon took a look at the near-term financial future of the United States, from local vacancy rates, to inflation and the outlook for investors. Below are some highlights of the conversation.
ARE WE IN RECESSION?
The speakers cannot say for sure whether the US is in a recession. In some views, it’s because the US has had two quarters of negative gross domestic product growth, said Andy Dodson, a financial adviser to Edward Jones in Nampa. However, other experts say the country is not in a recession due to factors such as unemployment, income levels and manufacturing activity, Manley said.
But, Manley said, “you can call it what you want. The economy contracted in the first part of 2022; you can’t sugarcoat that story.
To get a better idea of how the economy is doing, Manley looks at four indicators known as “the four horsemen of the economic apocalypse”: real estate investments, corporate investments, vehicle sales and retail inventory numbers. Each of these categories goes through cycles, and when the economy enters a recession, there’s a good chance that one or more of these indicators is “a contributing component,” he said she.
Currently, real estate investment is slightly below its long-term average, but there are “no warning signs,” Manley said. Corporate investments are slightly above the long-term average and vehicle sales are squarely in the long-term average, albeit below their previous peaks, she said. Retail inventory is suppressed, but that could be attributed to supply chain issues, she said.
“All of this is to say that there are no obvious areas of imbalance in this economy… there are no bubbles about to burst,” he said. “And as we like to say, ‘it’s really hard to get hurt falling out the basement window.'”
That doesn’t mean the economic outlook is great, but he said investors are hoping for a flat 2023 and that it’s “not as bad as many of us are prepared for.”
PREPARING FOR RECOVERY
Dodson said it’s a good time for investors talking to their financial advisers to position themselves to reap the rewards when the economy recovers. Historically, recessions tend to last about a year, while recoveries last about five, she said.
It may be feeling worse for some investors right now because it’s unusual for stocks and bonds to fall at the same time, he said. This is only the third time it has happened since 1929, she said. Typically, when one asset goes down, the other goes up, she said.
Usually, by the time the Federal Reserve stops raising interest rates, both bonds and stocks have “had a very robust rate of return over the next 12 to 24 months,” he said. But when exactly that will happen isn’t clear, she said.
ECONOMIC OUTLOOK FOR NAMPA AND CANYON COUNTY
Local economic activity has remained strong over the past year, said Robyn Sellers, director of economic development for the city of Nampa. He said he has received 23 inquiries since January about companies wanting to move locally.
Nampa is “lucky” to have continued to grow in population, largely thanks to people moving to the area, Sellers said. Having a strong workforce is necessary to attract employers, she said.
Nampa has seen great growth in the area around the Amalgamated Sugar facility, he said. For example, Stow Company, a Michigan-based cabinet maker, opened a new $143 million plant this summer that will bring 230 jobs, he said.
Mike Peña, a brokerage services partner with Colliers International and a former Nampa House Speaker, said Canyon County has maintained very high vacancy rates for commercial buildings, including industrial and commercial space, as well as residences.
Office vacancy sits at just 1.2%, the lowest the area has ever seen, he said. Despite the pandemic, the area has seen many workers return to these buildings, she said. Retail is also “extremely healthy” with 4.1% vacancy, she said. Conversely, some coastal cities have office and retail vacancy rates of 15% to 20%, she said.
The industrial space has a 1.9% vacancy rate, which is expected to rise, he said. That’s because there are currently 3.5 million square feet of industrial space under construction in the county, the vast majority of which doesn’t already have a tenant or buyer, she said. But even if just 50% to 60% of these properties were let or sold while the rest went on the market, the vacancy rate would still drop to a healthy 6% to 8% range, he said.
The low vacancy rates also apply to the residential market, he said. Multi-family housing in the county has a vacancy rate of 2.5%. And with single-family housing so difficult to afford and expensive to build, Peña expects demand for multi-family homes to increase.
This should complement the county’s desire to preserve farmland, he said. Multi-family housing reduces sprawl and can even solve problems like traffic if housing is built close to where residents work.
“You can’t be against high-density housing and for ag,” he said.
The sellers said Nampa saw building permits for single-family homes drop 33 percent, while multi-family homes increased 19 percent, which it called “unsurprising.” The two biggest factors are rising interest rates and the cost of building materials, he said.
Highway 16 development also holds promise for Canyon County businesses, Peña said. It will be comparable to the effects of the Ten Mile Road corridor over the past 10 years, including more office buildings and commercial development, she said.
“Having these large commercial buildings is great for the homeowner because it will reduce our property taxes,” he said, adding that most of the land has already been purchased and there are development plans in the pipeline.
Manley travels across the country and Canada and said Treasure Valley hope for its economic situation is rare.
“I can say with absolute certainty that there is no other place in America that is as optimistic about its community as you are about yours,” he said, and was met with cheers and cheers.
- Business leaders at law firms see external economic concerns, as well as cost and talent pressures, a new report shows
- Conditional Use Car Sales Business | Local news
- Business travel is back, but not as we know it
- Business and Engineering Students Win National Business Competition by Launching Pediatric Healthcare | Rowan Today