3 Things You Need to Know This Week | Jackson Hole, US Housing, Consumer Sentiment (Aug. 18, 2025)

Transcript

Paige Tyson:

Hello and welcome to 3 Things You Need to Know This Week. Our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. And with that, here are three things you need to know this week.

First, the Jackson Hole Symposium.

Starting Thursday, the Fed hosts its annual three-day central banker symposium in Jackson Hole, Wyoming. This gathering brings together central bankers, finance ministers and economists from around the world to discuss monetary policy. The event is notable for past speeches where central bank leaders have introduced or hinted at monetary policy changes. Fed Chairman Powell will likely deliver a keynote address at the conference on Friday, which market watchers will likely scrutinize for clues about future policy direction—specifically around rate cuts. However, we believe focusing too heavily on central banker speeches and forecasts is misguided. It's impossible to predict how officials will interpret future data, and central bankers have a long history of saying one thing and doing another. For long-term investors, we think it's important to monitor broader market trends and fundamentals, alongside monetary policy developments, to determine where the market may be headed next.

Next, US housing reports.

This week brings us several US housing market data releases, including housing starts, building permits and existing home sales data. The US housing market has faced challenges, with mortgage rates rising above 7% in recent years, the highest level seen since the early 2000s. Now, while long-term interest rates have declined somewhat and we do see signs people are adjusting to a higher rate environment, rates remain elevated compared to recent history and continue to weigh on the housing market. Now, many people believe real estate drives a significant portion of the economy. However, residential investment, which includes new home construction and remodeling, only represents about 3% of US GDP. That figure is down from around 5% two decades ago. This means falling residential real estate investment alone is unlikely to cause recession. We saw that in 2022 and 2023 when residential real estate investment detracted from GDP, yet no recession occurred. For investors, we believe continued economic growth and this bull market doesn't hinge upon housing market performance. It's common for investors to overestimate the economic impact of tangible sectors that they can see and feel, like real estate and manufacturing. But in actuality, the services sector comprises over three-quarters of the US economy. So while housing data releases may generate headlines over the coming week, remember the economic impact of the housing market is less impactful than many appreciate, and these reports on their own are unlikely to derail the bull market.

Finally, a look at eurozone and UK consumer sentiment.

On Thursday and Friday, we'll get August consumer confidence data for the eurozone and the UK. European investors entered 2025 with significant pessimism, concerned about potential Trump tariffs, tax hikes in Britain, France's budget challenges and a snap election in Germany. This negativity contributed to lower economic growth and earnings projections for Europe compared to the US. The correction earlier this year was another hit to sentiment. US consumer confidence has improved as markets reach new highs, but European and British sentiment still remains fairly negative. But as we often say, it's the difference between expectations and reality that matters most for stocks. You don't need reality to be perfect, just better than those expectations. And though many still focus on tariffs and Europe's headwinds, the economic reality has been quietly outperforming these pessimistic expectations. For example, the Citi Economic Surprise Index shows European economic data consistently beating forecasts by a wider margin than in the US, suggesting investors concerns about the European economy may be overstated. To us, this gap between dour investor expectations and the economic reality should continue to support European stock leadership going forward.

And that's it for this episode of 3 Things You Need to Know this Week!

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com. Thanks for tuning in and don't forget to hit 'Like' and 'Subscribe!'