The Dow hit its 25th record high this year on Tuesday, home prices are up by 20% in many American cities, and car prices are on the rise. Are these true signs of an economic recovery?
The Dow’s strength “does reflect some increase in America, and more importantly a lot of companies right now are reporting very healthy earnings,” explained Gillian Tett, a Financial Times columnist, but she’s not convinced the housing market’s health is organic.
“We’ve had a lot of help from the Fed in super low [mortgage] rates,” she said. “It’ll be interesting to see whether this housing increase continues once rates start to go up again.”
Tett and CNBC analyst David Faber were cautious to predict a full recovery from these signs: do the rising home prices actually benefit the middle class? Or simply widen the gap between the rich and poor?
According to Faber, the key for economic recovery relies on job creation for the middle class.
“Prices are rising but there is a small group of people really benefiting from that. Will there be a broader participation? That really starts and ends with job growth,” Faber said. “Until we see that, we can’t say that things are better.”
Watch the full conversation below.
Danielle Burger