Juggling Dynamite

According to the University of Michigan’s preliminary May survey, the U.S. Consumer Sentiment Index fell to 50.8, down from 52.2 in April. This marked the second-lowest reading in the survey’s nearly 75-year history, surpassed only by June 2022.

The decline is attributed to heightened concerns over inflation and the economic impact of President Trump’s trade policies. Notably, 75% of respondents spontaneously mentioned tariffs, up from 60% in April.

Inflation expectations have surged, with year-ahead projections rising to 7.3%, the highest since 1981, and long-term expectations increasing to 4.6%.

The Conference Board’s Consumer Confidence Index® also reflected a downturn, dropping by 7.9 points in April to 86.0 (1985=100). The Expectations Index, which gauges consumers’ short-term outlook, fell to 54.4, the lowest since October 2011 and well below the 80-point threshold that typically signals a recession

Travel is a discretionary expense that reflects consumer sentiment. When people are less confident about their financial prospects, they are less likely to plan vacations or leisure trips.

According to the Conference Board, the share of Americans planning to take a vacation in the next six months slipped below 40% in February for the first time since the pandemic. It ticked up slightly to just above 40% in April, but that was down from more than 44% a year earlier.Americans cite economic concerns and stock market weakness as reasons to cut back on summer vacation plans; many are swapping air travel and extravagant holidays for road trips and shorter vacations.

According to a Deloitte report, 41 percent of respondents are taking a trip of three nights or fewer, compared with 37% last year. See, Europe Is Out. Road Trips Are In. Welcome to the Scaled-Back Vacation:

The market’s rebound and the tariff pause didn’t change Ruswick’s mind. “I don’t have faith this is going to stay this way,” the 29-year-old software engineer said.

He feels pinched, now that prices for soda, meat and seemingly everything else are up significantly from a few years ago. His rent is also higher, and homeownership feels out of reach. The family is now planning a road trip for later this summer to South Dakota’s Black Hills. 

In the ‘easy-money’ ultra-low rate era, there was a lot of demand from secondary property owners for recreation or renting to others. Most were over the age of 50. An increasing number will look to sell to lower overhead/upkeep and free up cash flow in retirement.

The good news is that this will continue to increase the supply of properties in many areas and help deflate the price bubble that made housing unaffordable. The bad news is that many sellers who bought, renovated or refinanced near the bubble peak face losses.

The next time someone says, ‘You never lose money in real estate,’ tell them that’s nonsense and not supported by history. Realism informed by math is rare and valuable. See, They bought cottages during the pandemic real estate rush, now they’re losing when they sell:

A flood of buyers from cities pocketed recreational properties in cottage country all over the province, pushing prices to unseen heights. Now, after interest rates doubled, those pandemic buyers are trying to off-load their properties, and many are struggling to break even.

Across Ontario, the median loss for properties purchased in 2022 and 2023 and then subsequently sold was $45,000. In the GTA, the median loss was higher at $56,000. However, Muskoka experienced a median loss of $240,000 (although the volume of transactions was relatively low), according to a first-quarter 2025 report from Teranet, a real estate registry services company.

“During the pandemic, it was basically free money and it was easier to qualify for a secondary property,” Blenkarn said. “This is the fallout of that initial rush into the cottage market.”

Mean-reverting price pressures are not just in Ontario.

Investors are missing in both Vancouver and Toronto’s Condo markets for many reasons, contributing to Canada’s housing crisis in 2025. Join me together with other experts as we discuss this ongoing downturn trend with new listings piling up and the sentiments of buyers and sellers in the market. Here is a direct video link.
 More than 2,000 new condos in Metro Vancouver are sitting unsold and empty despite an ongoing housing crisis and steep rental prices, according to a recent report. Here is a direct video link.

CNBC’s Diana Olick joins ‘The Exchange’ to discuss the surge in supply of homes in the U.S. Here is a direct video link.

The S&P 500 risk premium—forward earnings yield minus the 10-year Treasury yield—is once again about zero (below since 2000, via The Daily Shot). Such dismal equity risk-reward prospects have only been seen once in the last quarter century and that was coming out of the 2000 bubble top. The large cap S&P 500 went on to crash 45% from March 2000 to October 2002 and did not recover its 2000 cycle high until July 2007, whereafter it crashed 56% into March 2009. It would not be until January 2013 that the S&P 500 durably reclaimed its 2000 secular high. Decade + periods of negative returns are the typical aftermath of extreme overpricing periods. Believe it or not.

Heavy participation from retail bagholders ‘investors’ is typical of market tops. Retail dip-buyers purchased a record $4.1 billion in US stocks during the first three hours of Monday’s trading session (shown below since 2014).

Finance-funded media has sucessfully fuelled another round of market mania in the past few years and enabled prices to dramatically overshoot earnings growth.

This is true even in the highest growth tech space. S&P 500 tech companies’ estimated earnings (yellow line below since 2023) grew an impressive 50% from 2023-2024 but their share prices (in blue) jumped an average of 112% (chart via @callieabost).Just as real estate owners are finding out the hard way (again), buying assets at uneconomical prices may seem busy and smart in the near-term, but mean reversion periods inevitably take back unearned winnings.

Bear markets, it is said, are periods when assets are returned to their rightful owners–strong hands take back from weak. And so it goes, cycle after cycle. This time is not going to be different.