Is the economy headed for a slowdown? Will stocks and mutual funds take it on the chin once again? An article* appearing today on cnbc.com suggests we might already be headed for a downturn. According to the article, when the Transportation sector begins to falter, it’s a lagging indicator of things to come. More specifically, the lead time is for a few months before negative growth creeps in. The transportation sector figures truck tonnage each month, revenue from air, freight and mail transportation, as well as rail freight and pipeline distribution. It also considers how many passenger miles there are in both private and public transportation. As of June of this year, the transportation sector’s downswing approached levels not seen since 2004.

 

What does this mean for investors in general? It might mean a reallocation of assets if negative growth is in the cards as Wall Street would take a hit. For real estate investors, it means financing costs would continue to remain near current levels. And if job creation begins to falter there will be less demand to buy a home and more to rent. That combination yields a consistent, positive cash flow from rental properties and an extended demand for rental housing. Rental demand also means positive appreciation for rental properties from single family homes to apartment buildings.

At present, a 15 year mortgage to finance a single family rental property is somewhere around 3.00%, and even lower if you look a little harder. These rates have remained within this tight range for quite some time and the prospects of a Fed tightening look less and less likely. For those who thought the Fed would have to raise rates this month, they may be rethinking that strategy.

*”Planes, Trains and Trucks Point to US Economic Downturn” cnbc.com September 8, 2016