Fear is a powerful force:  sentiment can often drive markets more so than data and facts, especially when politicians and media enablers promote false narratives relentlessly. There are many 'influencers' peddling the narrative that the Florida real estate market is collapsing. Collapsing? Maybe it's adjusting in areas, more so than others. The sentiments and the data are quite different. Is 5% lower pricing a "collapse" after increasing by 40+%? Is 30-40% more inventory a flood after virtually zero inventory? Sentiment fuels spending habits, often more so than data.

A massive swath of Americans felt they were really, really badly off just a few months ago when we had record markets, a strong dollar, historically low unemployment, historically low taxes, a growing economy, and wages overtaking inflation that had dropped significantly after a massive surge. In 2024, US corporate profits, with inventory valuation and capital consumption adjustments, reached a record high of $4.007 trillion in the fourth quarter, a significant increase from the previous quarter, doubling the profits seen in 2019 just 5 years earlier. Yes, US government debt and deficits soared too and were largely ignored.

One economic indicator that I would watch more closely in the next few weeks and months is consumer spending. It accounts for close to 70% of the US economy! If spending habits shift or slow, chances are the entire US economy will slow. What if consumers slow/stop spending out of fear?  But remember, most wealthy people are far more insulated from market shocks. Often they have cash savings and other investments to cushion steep drops. Someone worth $20 million who loses 20% of their net worth (especially if that money is in stocks they don't plan to sell), is more than likely going to be just fine worth $16 million.

It's the less wealthy or poor that are highly exposed and vulnerable when markets drop dramatically. Why? Corporations (big and small) must remain profitable, or at least break even to survive. This often requires cost-cutting if the economy slows notably. The health of the US economy will be measured primarily via consumer spending. Those without wealth insulation who lose a job are most impacted, regardless of unemployment benefits. Then they spend even less. That can snowball. Worse, often they slow spending out of fear before something bad happens. Usually rates are lowered to spur economic activity and spending. Don’t forget the US debt and deficits require tax collections. Lower rates can offset lower tax collections, but at some point our debt has to be brought down.

While data matters most, it's sentiment that actually can matter more in how it drives perceptions and markets. You can tell a buyer that something will sell over the asking price and they have to bid up and even then they may not WANT to believe the facts.