Confused? You’re not alone

By: J. David Chapman/June 11, 2020

Are you confused about the economy? Are you confused about the status of the pandemic? You are not alone. I think part of this confusion is the differences in the message we are receiving from the national media and the actual situation in Oklahoma. The situation in the economy and the situation in the pandemic is presented as extremely bleak by national news and talk shows; however, the situation in both seems to be improving every day in our local cities in Oklahoma.

The stock market looks like a return to pre-pandemic levels is almost certain. Unemployment numbers are improving weekly as the economy is opening back up. Municipalities are reporting better sales tax results than first feared. The residential real estate market has barely missed a beat during the pandemic. My prediction is that commercial real estate will also perform significantly better than analysts’ predictions.

I think the stock market and real estate investors, to some degree, have been encouraged by three different happenings. The first is the rapid reopening of the economy in most states. Oklahoma is almost completely open, and sales tax, traffic, and spending seem to be following suit. Secondly, in Oklahoma, the COVID-19 numbers, knock-on-wood, still seem to be trending positively after opening the economy. There is growing confidence that a vaccine is coming our way sooner, rather than later, to fight this virus and that we can continue to successfully fight it until the vaccine becomes a reality. Lastly, Federal Reserve Chairman Jerome Powell has indicated to investors that the central bank’s checkbook remains wide open, strongly hinting that more monetary policy stimulus is on its way. This might not be needed because it looks like the rapid action taken by the present administration is making a huge difference in maintaining and sustaining the economy until it can return on its own.

I have hinted in the past month my concern that the price of oil might be the real spoiler in the Oklahoma economy returning to pre-pandemic levels; however, even the price of oil seems to be responding to changes in geopolitical developments and the opening of the economy. We are, by no means, out of the woods on this pandemic and the economy still has a long way to recovery. My advice for real estate investors is to focus on the local market and we will see a lot of positive developments.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).