A market indicator has experts worried that Southwest Florida and the broader United States, will be in a recession within the upcoming months.
But, Southwest Florida is booming today with construction on every corner, busy beaches and plenty of jobs.
Dr. Shelton Weeks, Florida Gulf Coast University dept. chair of economics and finance, points to changing signs in the Southwest Florida economy.
“When the national economy turns down, the county of Southwest Florida and Florida as a whole tend to suffer more than the national economy,” Dr. Weeks said.
On Friday, a tool known to forecast recessions and mass unemployment inverted. It is a sign of an upcoming recession, including the six most recent. As the market digests the news of the inverted yield curve over a couple of weeks, people will likely lose confidence in the markets.
“We have these short term rates that are longer than the long term rates,” Dr. Weeks said. “That’s the inversion in the yield curve.”
When we loan money to the government, such as buying a bond, investors will get interest back. Theoretically, the longer the bond, the higher the rate of return an investor should receive.
But, now the short term bonds are making more money than those for a longer term. It has turned the curve upside down, which signals less confidence in the future of the economy.
Brian Rezny, owner and money manager at Rezny Wealth Management in Fort Myers, agree. If you want to hold onto cash, you need to start looking at signs around you.
“The inverted yield curve is just one piece of the puzzle,” Rezny said.
“Loan activity is a big indicator in Southwest Florida,” Dr. Weeks said. “The amount of construction is going on, retail spending, as well as spending on tourism.”
If a recession is imminent, the Federal Reserve will lower interest rates to return the curve to normal. In the meantime, it would be prudent to reevaluate investments taking into account recent market data, but drastic action is not needed.
“This is not a time to panic,” Dr. Weeks said. “However, it is a sign that we do need to be vigilant.”