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S.W. Florida Daily News


As bear market hits U.S. economy, what is the SWFL impact?

As bear market hits U.S. economy, what is the SWFL impact?
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CAPE CORAL, Fla. — It’s a curious place, marked by extreme financial ups and downs.

Up: Inflation (8.6% from May 2021), real estate (up 29.2% in Lee County since May 2021, per Rocket Homes).

Down: The S&P 500 (down 22% from January 4). NASDAQ (down 32% from November 2021). Dow (down 16% from November 2021).

We’re in this most unusual place where just about everything costs more but most of our collective retirement accounts or stock holdings have plunged in value over the past year.

“I believe this is the depression of our generation,” said Dr. Thomas Smythe, a professor of economics and finance at Florida Gulf Coast University. “We’re seeing it an experiencing it in, somewhat, different ways. We’ve been through, obviously, a market crash, a contraction of the economy on the order of (up to) 15 percent. Even as we’re coming out, we’re seeing all this choppiness because of some of the policies that were implemented. In some cases, necessary policies but they were bound to have some negative consequences.”

Smythe told FOX4 that he believes the economy “is likely headed for recession” and that the markets have a tendency to be a precursor.

As the economy is in this odd spot where stock markets are dropping and inflation is biting budgets but the unemployment rate is also hovering near a 50-year low point.

“The hot job market is actually a symptom of inflation,” said Smythe. “The big difference between what we’re observing now and everything since (the early 1980’s), we’ve averaged probably about two percent inflation prior to early 2021. In what we’re seeing now is the impact on or the potential impact on the economy of that inflation.”

He points to the wage and salary increases for many workers getting wiped out by higher costs for housing, gas, energy and groceries.

“With inflation, we’re already starting to see areas of the economy that sort of depends on discretionary income start to fall,” said Smythe.

FOX 4 has covered recording-breaking tourism so far in 2022. This could be the result of a built-up demand to travel, Smythe said, but not many options for people who found themselves with plenty of cash to burn after being stuck at home for 2020 and into 2021.

“People saved up money,” Smythe explained. We weren’t essentially allowed to travel. It’s only recently that we’re likely to be able to start going overseas again. More importantly, having overseas travel come here. So, in essence, what people I think have happened has happened is it’s a psychological effect. We’ve been pent up for two years, we’ve been able to save money because there weren’t places to spend it. Even though prices are higher, we want to get out of Iowa or Illinois or wherever it is, and obviously Florida and southwest Florida, in particular, are good destinations. So we may see a pinch next year but it is important to point out that a lot of what we’re seeing right now is travel from people that may not have normally come to Florida for their vacations. We typically don’t see the level of tourism that we’re seeing right now, because it’s out-of-season.”

The economy is also seeing some of the impact of higher interest rates for mortgages, which could also effect the high increases in housing costs in Southwest Florida.

“(The higher rates don’t) mean there’s going to be a crash necessarily,” said Smythe. “We’ll likely see some price decline because we still have housing shortages here in southwest Florida. That’s not going away. But those interest rates are going to lead people to either have to buy lower-priced homes or the prices are gonna have to come down. We’re already seeing the effects of some of what’s going on.”

Smythe also notes he does this the bear market or recession could last longer than some of the predictions from the financial analysts.

“So when housing, cars and food and gasoline (goes up) s a direct result of that inflation, we withdraw from all areas of discretionary spending, whether it be travel, purchasing things for your home, whatever that is,” said Smythe. “We started to pull back. That’s where the recession starts to come into play. Eventually that will probably lead to layoffs of some magnitude, although it’s far too early to tell.”

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