We are just about at the mid-year point of what has been a turbulent year for the economy. As I have written about recently, the stock market continues to hit all-time highs, while Americans are feeling as pessimistic about the economy and their own personal finances as they have at virtually any time in history (or at least over the last 60 years).

Gas prices rose this spring over 60% due to the Iran War, and although the average price per gallon is down about 60 cents in the past month thanks to rumors of a ceasefire (and, indeed, the subsequent signing of a ceasefire deal this past Thursday), Americans are fed up with prices at the pump. Gas prices are not only a highly visible marker of how the economy directly impacts people, but the actual mathematical impact of high prices ripples through to many different areas of family budgets because it raises the costs on all manner of other goods and services that have an oil component to them (which is virtually everything).

This is an important election year. Voters are complex. They care about many different things with varying levels of intensity. To some, immigration is the most important topic. To others, it is the environment, or healthcare, or any one of dozens of other topics. The American electorate is diverse and complicated.

But there is one issue that overarches most everything else. As James Carville famously said in 1992, “It’s the economy, stupid.” The economy consistently polls as the top issue on Americans’ minds. And even voters who may care about something such as, say, public education, often care about the economy at least on par if not still more so than any other topic. So when looking at electoral prospects, it’s pretty important to bore down on voters’ views on the economy. And that’s bad news right now for President Trump and his fellow Republicans.

Headwinds and Downdrafts

Putting a pin in the conversation about how Americans’ views on the economy may impact the 2026 mid-term elections, it’s worth a primer on mid-term elections in general. The party of the president in power almost always does poorly in the mid-terms, sometimes staggeringly so. Since World War II, the president’s party has lost an average of roughly 25 seats in the U.S. House of Representatives during midterm elections. The Senate often follows a similar pattern, though the results can vary depending on which seats happen to be up for election in a given cycle and how Democratic or Republican those particular states sway.

Some of the most notable examples of mid-term routes have become political landmarks and have represented significant inflection points for the country. In 1994 during the presidency of Bill Clinton, Republicans led by Newt Gingrich and his “Contract with America” gained 54 House seats and captured control of Congress for the first time in four decades. In 2010, amid voter frustration over the economy and backlash to the Affordable Care Act, Republicans picked up 63 House seats during Barack Obama’s first term, one of the largest midterm swings in modern history. More recently, Democrats gained 41 House seats in 2018 during Donald Trump’s first presidency. Given how many seats in both houses of Congress are relatively safe (i.e., it’s hard for a Democrat to win in extremely conservative districts, and vice versa), swings of 40 or more seats in one election are pretty significant.

There have been exceptions, but they are rare. Following the September 11th terrorist attacks, Republicans actually gained seats in the 2002 midterms as President George W. Bush enjoyed exceptionally high approval ratings, albeit temporarily so. In 1998, Democrats actually gained seats during Clinton’s second term as voters reacted negatively to impeachment proceedings, which they perceived to be ineptly led and overreaching in scope. Even these exceptions, however, reinforce the broader rule: midterm elections are typically a referendum on the party that occupies the White House. In the 1998 midterms, voters put their weight behind Clinton; in 2002, they did so for Bush. But more often than not, voters punish the party of the president, regardless of which party he happens to represent.

Why this pattern? It’s largely just because of how the political pendulum swings. Whichever party wins the presidency enters that first two-year period with high expectations, which are often hard to meet. Voters are more inclined to disappointment than appreciation after the emotional high of a presidential victory. Moreover, voters may just get tired of that party’s leadership after two years, plus there is the opposition party bombarding the president and their party with a negative onslaught of relentless attacks, which, fair or unfair, impact voter opinions and lead to negative sentiments. The opposition is often more motivated than the party-in-power, which not only leads to more relentless attacks, but more motivated voters come November of the mid-term cycle. Some of the president’s voters may become complacent and just stay home, dampening electoral support for his allies.

I think there is also a case to be made that voters just tend to like divided government. Americans are naturally skeptical of too much centralized power, and so they use their votes to put more power in the opposite party of the president if things get too out of balance.

Looking Ahead to November 2026

That historical backdrop creates a challenging environment for Republicans heading into 2026. You could almost strip out any policy decisions, any ebbs and flows in the economic numbers, and ignore worldwide events that may or may not occur this year, and Republicans are in trouble simply because they face the same political gravity that has pulled down presidents of both parties for decades. For that reason alone, it sets up as a bad year for Republicans.

And yet, 2026 could be potentially really bad for Republicans, and that’s because of the voters’ aforementioned views on the economy (as well as some other key issues, which I’ll touch on later). As noted above, the University of Michigan Consumer Sentiment reading hit an all-time low in May (it improved modestly in June, which is largely attributable to a modest drop in gas prices).

Polling numbers are tough for Trump on the economy right now, particularly as this had previously been an area of strength for him. A PBS/NPR/Marist poll found just 33% of Americans approve of President Trump’s handling of the economy. Just 29% of Americans say the economy is good, per CBS polling. Even Fox News polling has Trump underwater on the economy, with just 31% of Americans approving his handling of the issue. According to the Fox News poll, 44% of Americans say they are falling behind financially, while just 12% say they are getting ahead.

It’s inflation (including gas prices), frustrations with the Iran War, and even anxieties about AI’s impact on the workforce that have Americans feeling anxious, and that is bad news for the people at the top.

So What?

Republicans hold a slim 220-215 majority in the U.S. House of Representatives, which means Democrats just need to flip three seats to take back control of the House. Various prediction models show Democrats picking up anywhere from two to 25 seats, depending on how strongly historical variables are factored in. On generic ballots, Democrats are currently outpacing Republicans by about 7%.

Real elections, of course, take place between actual candidates running on a mix of local and national issues, so take the generic ballot statistic with a grain of sale. Candidate quality race-by-race matters a lot, too. But it’s safe to say Democrats should be favored to at least gain ground, however, and probably take back control of the House of Representatives.

On the Senate side, Republicans currently have a 53-45 majority, with two Independents who caucus with the Democrats. Control of the Senate is expected to narrowly stay with Republicans, although anything can happen (the Democrats’ path to regain control runs straight through Maine, by the way, with the insurgent and complicated Graham Platner taking on long-time incumbent Susan Collins).

Needless to say, control of Congress matters for a whole bunch of reasons, including how easy or difficult it becomes for the president to press through his agenda. A House or Senate (or both) in the hands of the Democrats not only provides a stronger check and balance on President Trump, but it could open up the possibility of investigations and more, including even impeachment hearings. That’s all beyond the scope of the article today, but you get a sense of the gravity on why all of this matters.

What Might Happen

At the time of this writing, there just over four months until Election Day. If everyone knows the economy is the top issue, and the stakes are as high as they can get, it begs the question of what President Trump and his Republican allies might do (or even can do) to bolster the economy or at least make people feel less anxious about it in the next 135 days.

For starters, you can make a clear case that the signing of a temporary ceasefire to bring about the end of the Iran War was done in direct response to Americans’ disdain for this conflict and the impact on the price at the pump (not to mention the loss of American lives and resources…military, monetary, and otherwise). Things went very badly for President Trump in terms of his approval rating immediately when the Iran War began, and things got progressively worse. Ending the war is perhaps an attempt to stop the bleeding, politically speaking. The Iran War was popular with very few people.

Gas prices are the most obvious area for action, as they impact so much of what people are feeling and experiencing in the economy. Beyond ending the Iran War aside (or attempting to), other actions that could be done include opening up the country’s strategic reserves, although that takes some time and the impacts are not necessarily immediate, or increasing oil production, but, again, that takes some time.

Interest rates would be another area to look at, which the president perhaps tried to do by choosing Kevin Warsh to lead the Fed. Unfortunately for President Trump, Warsh did not lead the Fed into an interest rate cut at his first meeting this past week, and instead the Fed seemed to signal that interest rate hikes may be necessary later this year in order to help quell inflation, which at 4.2% is now running at its hottest rate since April 2023.

A third thing Trump could do, which would require a pretty hard pivot from his previous stances, is to soften his language and implementation strategies on tariffs. Not only have tariffs actually increased the cost of some goods and services, they are wildly unpopular with American businesses and consumers, so softening his position may at least signal to voters there is a better path ahead on this front.

What Is Likely to Happen

There is a difference between taking steps to actually improve the economy (which is difficult to do in such a short period of time), and taking steps to improve voters’ perception of the economy. On the latter point, simply avoiding self-inflicted challenges like major trade disputes, a prolonged negotiation on Iran, sudden (and erratic) policy reversals, and avoiding political fights over shutdowns and the debt ceiling would probably go a long way. But some of the Trump appeal (to his base, at least) is that he doesn’t shy away from these things; it’s part of his core appeal.

Other policy moves (including some of what is noted above), don’t generally come together in mere months. Tax policy, for example, or infrastructure investments that would have positive economic ripples through the economy, sometimes take a president’s entire term to formulate, let alone implement.

What much of this will come down to, therefore, is public relations rather than true economic policy moves. Can Trump spin this economic ball in enough positive ways that voters don’t punish his party come November. The problem with spin on the economy, however, is that millions of Americans are actually living it day-to-day in ways that President Trump and many of his allies simply do not see or relate to.

One possible advantage Trump and the Republicans have is that fewer and fewer districts are true toss-ups. Even as compared to the examples of 1994 and 2010 noted at the outset, districts have become more starkly partisan, and therefore less likely to flip in a general election. A Blue Wave of 50 seats thirty years ago may be a more muted shift of, say, 20 seats today because fewer districts are actually prone to swing in any given cycle. If anything, some districts today will swing from a moderate Republican to a more conservative one in the primary, who then wins in November, or a more moderate Democrat getting taken out by a more progressive one in the primary.

But time will tell. The political gravity that puts Republicans at a steep disadvantage this year plus the economic woes felt by voters set up pretty squarely for some kind of Blue Wave this November, for sure. That said, elections are not won in June, and the candidates themselves and local conditions in each respective race matter too. So there is a long way to go between now and November.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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This past Friday, SpaceX became the largest IPO in history (ticker symbol: SPCX), with a launch price of $135 per share, which then ballooned to $150 per share at the immediate market open. The intraday price peaked at $176.52 just after 1:00 p.m. before settling back to end the day at $160.95.

That first-day ride alone underscores one of the risks inherent to the retail investor when investing in Initial Public Offerings. There were so many orders for SPCX queued up that many buy orders did not actually get filled until later in the day. Very few ordinary investors were able to get access to SPCX at $150, let alone $135. Instead, many of the buy orders were executed north of $170 several hours after the stock market opened. The headlines will say SPCX rose 19% on its first day of trading. In reality, however, if your order didn’t get filled until 1:00 p.m. and you held until the end of the day, you ended up down 8.5%.

There is understandably a lot of excitement about investing in IPOs. Companies that are going public are often ones with fascinating stories, compelling products, futuristic ideas, and either proven or expected future revenues that investors want a piece of. But is investing in IPOs on the first day of trading or even in the subsequent days and weeks that follow a good idea?

We’ll look at what history tells us, but first, a quick primer on how some investors gain access to IPO shares before the rest of us:

To Be An Insider

Most IPO shares are not initially distributed to ordinary investors. Instead, the investment banks underwriting the offering allocate shares to large institutional investors such as mutual funds, pension funds, hedge funds, insurance companies, and other major financial firms. These institutions often receive shares at or near the IPO price before public trading begins.

A smaller portion of shares may be allocated to wealthy clients of brokerage firms (which is actually pretty unfair, when you think about it). Company insiders, employees, venture capital firms, and early investors who backed the company before it went public also often have special access, sometimes through employee compensation plans that provided pre-public shares of the company to key individuals.

Some brokerages do offer IPO access to retail investors, but in highly anticipated offerings demand often far exceeds supply. In practical terms, many investors who want shares at the IPO price simply cannot get them. This creates an interesting dynamic, as was the case with SPCX as noted above. By the time public trading begins, much of the initial allocation has already been spoken for. The first day of trading becomes a battle between eager buyers trying to establish positions and a relatively small number of shareholders willing to sell (although as the share prices rockets upward, more sellers are brought into the market in order to try to lock in gains, often realizing the financial windfall of a lifetime in the process).

For the retail investor, the primary way to buy shares directly in a newly offered stock is simply to place an order through a brokerage account at Vanguard, Fidelity, or another brokerage firm and hope it gets filled. It might seem strange that an investor could place a trade when the market opens at 9:30 a.m. and not have it filled until hours later, but a stock trade is exactly that…a trade. For a buy order to be fulfilled, someone on the other side of the transaction must be willing to sell. In the immediate aftermath of most IPOs, there are very few sellers and countless buyers. As a result, it can take hours for all of those buyers to find willing sellers.

What History Tells Us About IPO Investing

That investing in compelling companies can make financial sense is self-evident. Virtually every publicly traded company was an IPO at one point (other than ones that were spun off from an existing customer with shares placed into trading without a typical IPO). Amazon, for example, went public in 1997 at $18 per share and finished its first day at $23.50, a gain of 31%. The stock traded as high as $29.75 during that first day, by the way, illustrating an intraday trajectory somewhat similar to that of SPCX (i.e. a sharp rise followed by the air coming out of the balloon in the latter hours of the day). Whether SPCX has a long-term trajectory similar to AMZN remains to be seen. If you had somehow been able to invest $10,000 in AMZN at the IPO price, it would be worth over $30 million today (!!!).

History, however, provides mixed evidence when it comes to investing in IPOs. Some became legendary success stories, like the clear case of AMZN. But other high-profile IPOs have had rockier starts. Facebook, for example, went public in 2012 amid tremendous excitement. Shares were priced at $38 and briefly traded above that level on opening day. Within four months, however, the stock had fallen below $18 as investors questioned the company’s ability to monetize its users. Those who declared the IPO a failure were eventually proven wrong as the company has since become one of the most valuable in the world, but it required patience as early investors took losses on paper in the early months of public trading.

The lesson is that a great company does not always make a great short-term investment. IPO investors are often paying not only for current results but also for years or even decades of expected future growth. When those expectations become too optimistic, even outstanding businesses can produce disappointing investment returns, which a lot of retail investors learn the hard way.

There are plenty of examples of IPOs that have failed. Pets.com is the classic example, having gone public in February 2000; just 268 days later, the company went out of business and investors had lost nearly everything. In 2021, Rivian went public, which was understood to be a hot new electric vehicle start-up. Shares have lost about 90% of their value since. It’s fair to say that SpaceX is not Pets.com, nor will two upcoming highly anticipated IPOs that should launch later this year: Anthropic and OpenAI, which are both slated to go public before the end of the year.

The Other Way Americans Get In On IPOs

There is another way ordinary investors participate in IPOs, often without even realizing it: through index funds.

When a newly public company eventually becomes large enough to qualify for inclusion in indexes such as the S&P 500 or Nasdaq 100, the index funds tracking those benchmarks are effectively required to buy shares. Millions of Americans therefore gain exposure to these companies automatically through their retirement accounts and investment portfolios.

This also creates a risk that many ordinary investors are probably not thinking of. While index funds remain one of the most effective long-term investment vehicles ever created, many major indexes have become increasingly concentrated in a relatively small number of large technology companies. Investors often believe they are broadly diversified when, in reality, a substantial portion of their portfolio may be riding on the fortunes of a handful of AI, technology, and communications firms. In the S&P 500, for example, the ten largest companies make up a weighted percentage of about 40% of the overall index. Since these stocks are typically highly correlated, high-tech companies, if they start to drop, it will disproportionately bring down the entire index and, with it, trillions of dollars in low-cost index funds. I wrote about this last October, saying:

If you have a 401(k), IRA, or index fund, you are likely (whether you realize it or not) participating in the AI boom. That’s not necessarily bad; innovation and long-term growth are the bedrock of markets. But it does mean you should be prepared for volatility. When a small group of stocks drives most of the market’s gains, the same dynamic can magnify losses when sentiment shifts.

That does not mean a collapse is imminent. But investors during the Dot-Com Bubble of the late 1990s learned that concentration risk can lurk beneath the surface of an otherwise diversified portfolio. If enthusiasm surrounding AI and other emerging technologies cools, many investors may discover they had more exposure to those sectors than they realized.

Are We in a Bubble?

We are nearly 2,000 words into this article, and I haven’t addressed one obvious question: What is SPCX actually worth? At Friday’s closing price, SPCX carried a market capitalization of approximately $2.1 trillion. That instantly made it the seventh-largest publicly traded company in the world. (Trivia question: Can you name the six larger companies? Answer at the end of the article.)

By traditional valuation measures, SPCX is difficult to justify. Investors are assigning an enormous value not only to the company’s current operations but also to its future potential. Most valuation models are built around present earnings, cash flow, and revenues. Judged solely by those metrics, SPCX appears extraordinarily expensive. Yet investors are not buying SPCX based on what it earned last year. They are buying it based on what they believe it might become.

Bulls argue that SpaceX is not merely a rocket company. They see it as the dominant provider of global satellite internet through Starlink, a critical player in defense and communications infrastructure, and perhaps eventually the transportation backbone for industries that do not yet fully exist. Supporters see a company whose future opportunities cannot be measured using traditional metrics. Skeptics see a company priced far beyond its current fundamentals.

The honest answer to the question of whether we are in a bubble is that no one truly knows. Bubbles are easy to identify after they burst and remarkably difficult to identify while they are inflating. In 1999, many investors recognized that technology stocks had become detached from reality, but few accurately predicted when the party would end. Likewise, many investors correctly identified the housing bubble before 2008 yet still struggled to profit from that insight because markets remained irrational longer than expected.

There are certainly signs of exuberance today. Valuations are elevated. Money for deals is flowing. Companies connected to AI are attracting enormous amounts of investor interest. Those conditions often accompany speculative periods.

At the same time, genuine technological revolutions do occur. The internet changed the world. Smartphones changed the world. AI is doing the same. The challenge for investors is distinguishing between revolutionary technologies and the excessive valuations that sometimes accompany them. Both can be true at the same time.

For ordinary investors, the broader lesson may be simpler. IPOs are exciting. They generate headlines, create overnight millionaires, and offer the allure of getting in on the ground floor of the next great company. But history suggests that excitement and investment success are not always the same thing. The simple fact of so many high-profile tech-based IPOs taking place in the same year is itself a sign of frothy, frenzied times, but then again, we do live in interesting times. More to come in the weeks ahead.

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Trivia Answer: The six publicly traded companies larger (at the moment) than SPCX are Microsoft, NVIDIA, Apple, Amazon, Google/Alphabet, and Facebook/Meta Platforms.

Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Kevin Warsh, the newly installed Chair of the Federal Reserve, finds himself in an impossible predicament. He must appease the markets, his fellow Fed Governors, and unfortunately for him, the ultimate audience of one, the man who appointed him, President Donald Trump. The goals and needs of each of these distinct forces of nature conflict. Auspiciously but perhaps not surprisingly, Warsh was introduced as the new Fed Chair at the White House and not at the Federal Reserve itself (a break from historical precedent), with Trump saying later that same day that he thinks rates will come down "very quickly.”

But will they? Not if the typical market indicators are to be believed (and acknowledged). First of all, the latest Consumer Price Index report showed inflation running at 3.8%, which is the hottest it’s been since May 2023. It would be economic malfeasance to lower rates when inflation is running hot because, in doing so, lower rates might very well spark further economic fervor, thereby causing inflation to rise even faster (at least according to traditional economic theory).

At the same time, the unemployment rate is 4.3%. This rate has been creeping upward since the recent multi-year lows in the 3.5% range three years ago, but overall, the labor market has been fairly stable (concerns and anxieties around AI and a possible workplace wipeout aside). If anything, the primary stress in the job market is that people don’t feel they are making enough money to keep up, which is largely a reflection of inflation, and not the health of the labor market itself.

A strong jobs report just this past Friday showing 192,000 new jobs created actually sent the stock market spiraling, as the good jobs numbers signaled to investors that rate cuts would be less likely now. It may feel backwards that a strong jobs report ended up leading to a stock market rout on Friday (the S&P 500 fell 2.6%), but it’s because interest rates are such a key variable in the investment world. Anything that suggests rates will stay elevated or even climb is bad news for stock investors, who want the frenzy that might come from lower rates. So it’s good that there were a lot of new jobs created, but bad for the stock market. Like I said, kind of backwards, but that’s how it goes sometimes.

Who is Kevin Warsh?

It’s all fair to ask, then, why would the Fed lower rates now, with inflation too high and employment basically stable. Well, it all depends on whether you think Fed Chair Warsh’s nomination came with strings attached (i.e. “I will appoint you, but you must lower rates.”). Or perhaps Kevin Warsh himself may believe rates need to come down, so it’s less of a puppet scenario and actually just a reflection that Trump appointed him because they share similar philosophies. So, do they?

Kevin Warsh is not an everyday name that many Americans will recognize (other than through recent news coverage), but he is a well-known figure in Federal Reserve circles. Before becoming Chair, Warsh served as a member of the Federal Reserve Board of Governors from 2006 through 2011, putting him in the room during the financial crisis and the Great Recession. Prior to that, he worked in investment banking at Morgan Stanley and later served as a special assistant to President George W. Bush.

Since leaving the Fed, Warsh has spent much of the past fifteen years as one of the institution’s most prominent outside critics. He has repeatedly argued that the Federal Reserve was too slow to recognize the inflation surge that followed the pandemic, and has often emphasized the importance of maintaining price stability. In congressional testimony earlier this year, he stated bluntly that “inflation is the Fed’s choice,” reflecting his belief that the central bank bears primary responsibility for controlling inflation.

That history makes Warsh a, well…interesting…choice for a president who has consistently pushed for lower interest rates. Traditionally, Warsh has been viewed as someone who is more concerned about inflation than about stimulating economic growth through lower rates.

The question investors are trying to answer is whether Warsh the critic will resemble Warsh the chairman. Will he prioritize inflation control above all else, consistent with much of his public commentary over the past decade? Or will he prove more flexible now that he sits in the most powerful monetary policy seat in the world? Time will tell.

How Interest Rates Actually Move

To answer the question of how interest rates fluctuate, it’s important to distinguish between several different types of rates. Treasury notes and bonds, for example, fluctuate all day long because they are bought and sold continuously on the open market. Home mortgage rates, which typically correlate with Treasuries, also move daily (although some banks and mortgage brokers might only update their menu of rate options once or twice a week, if that).

The Federal Reserve, however, directly controls only a short-term benchmark known as the federal funds rate. This is the rate banks charge one another for overnight lending. While consumers generally never borrow at the federal funds rate itself, it influences a wide range of other rates throughout the economy. Closely related is the Prime Rate, which commercial banks use as a benchmark for many business loans, credit cards, and home equity lines of credit. When the Fed changes the federal funds rate, the Prime Rate usually moves almost immediately afterward.

The Federal Open Market Committee (FOMC), the Fed’s monetary policy arm, typically meets eight times per year to determine whether rates should rise, fall, or remain unchanged. While emergency meetings are possible, they are rare. The most notable recent example occurred in March 2020, when the Fed held two emergency meetings in the span of two weeks and slashed rates by 150 basis points as the COVID-19 pandemic threatened to shut down large portions of the global economy.

So can Warsh just move rates on his own? The short answer is no. The FOMC consists of twelve voting members: the seven members of the Federal Reserve Board of Governors, the president of the Federal Reserve Bank of New York (by default), and four rotating presidents from regional Federal Reserve Banks around the country. The Chair leads the discussion and often exerts significant influence, but the Chair does not possess unilateral authority. In the end, policy decisions are determined by a majority vote of the committee based on their own read of the economic indicators and their own economic perspectives and philosophies.

So What’s in Store?

There are a lot of variables moving in seemingly opposite directions. Inflation is elevated; employment is stable. Trump wants rates to come down, but Warsh has signaled, at the very least, that he will strive for independence. Plus, as noted, rate decisions are not entirely his alone to make as he works in concert with a board of Fed Governors.

A quick note on inflation: there are signs that inflation is likely to ease back down, which may help make the case for lowering interest rates. The key variable right now is gas prices, which, fortunately for the consumer, have been actually going down over the past two weeks. According to GasBuddy, the average price of a gallon of regular was $4.51 as recently as May 24th. But now, just two weeks later, the price has fallen to $4.13, which is a pretty notable drop in a relatively short period of time. The key reason for this is the hope of a true ceasefire in Iran and the re-opening of the Strait of Hormuz, which will get oil flowing globally again. Countries around the world have also been tapping their oil stockpiles to help ease price pressures at home while they wait for resolution in the Middle East.

If oil does continue to drop, it should have the effect of helping inflation get back towards the desired 2% level. Not only is the price at the pump a key piece of the overall inflation rate, but oil is baked into so many different products and services that an anticipated drop in prices helps ease prices throughout the wider spectrum.

The Odds

In my earlier draft of this article at the beginning of the week, I had the odds at 50-50 for interest rate cuts later this year via the Fed. This was based on analysis from the CME FedWatch Tool. Regrettably I did not capture a screenshot of the 50-50 odds via CME from earlier in the week, and as of this writing late Saturday evening, the website link is broken, so you’re just going to trust me on this one. The 50-50 odds were a 50% chance of rate cuts and a 50% chance of rates generally staying where they are or increasing modestly.

The story was different by the end of the day on Friday, however. Friday’s strong jobs report moved the odds to 60-40 in favor of interest rate hikes by the end of the year. Prediction markets like Kalshi now have a 77% chance of zero rate cuts this year, and a 47% chance of interest rate hikes. The odds climb to a 65% chance of rate hikes by July 2027. In other words, there is now a low likelihood of rate cuts for the remainder of 2026, and by this time next year, interest rates could actually be higher than they are today.

This is not good news for borrowers and would-be borrowers who are anxious for some rate relief. To be sure, rates have actually come down 100-200 basis points (for all intents and purposes, 1-2%), in the past 18-24 months, so there has already been some help for borrowers compared to the interest rate peaks we saw from 2023-2024. But the conventional wisdom at the beginning of 2026 was that rates would ease down throughout 2026, perhaps by a quarter point two or three separate times. Stubborn inflation that has been amplified by an Iran War oil spike and, more positively, a strong jobs market, has not only backed up the timeline of interest rate cuts, but started to bake in rising rates.

We’ll see what happens over the coming months. I expect gas prices to continue to ease down. Oil is just one variable (albeit it a notable one) in complicated mess of politics, economics, and global affairs leading up to the November midterm elections here in the United States.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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An ominous milestone was reached this past week with the S&P 500 hitting yet another all-time high while, simultaneously, the University of Michigan’s consumer sentiment report, which has been issued monthly for nearly 75 years, hit an absolute all-time low. Holy cow. Even to someone who follows this stuff pretty closely, the stark juxtaposition feels jarring. The stock market is quite literally better than it has ever been, while people in aggregate are feeling worse than they ever have about the economy.

A quick look at the numbers: The S&P 500 actually hit all-time highs for four consecutive days this week, closing higher on the week for the ninth week in a row, which is the longest winning streak the index has seen since 2023. The index is up 10.5% for the year so far.

Moreover, not only is the 10.5% rise this year a bit surprising based on everything that is going on in the world, it comes on the heels of double-digit increases in each of the last three years; The S&P 500 was up 24% in 2023, 23% in 2024, and 16% in 2025. Although the stock market historically has more good years than bad, it is relatively rare to see such robust gains over such a sustained period, which is why many market observers (including me) have been anticipating a pullback. Yet the market keeps climbing.

I remember an old cliché I would share with customers when I was in the investment business that was meant to temper expectations and remind people that there is always a risk of loss when investing in the stock market. “You know, someone could sneeze in the Middle East, and the markets could drop 25%,” we would say. Obviously, that has not been the case this year. Markets have been amazingly resilient not just to conflict in the Middle East, which has resulted in disruption to global supply chains and sharply higher gas prices around the world, but also to political turmoil here at home and a general sense of economic unease throughout various industries and geographies from Silicon Valley to New York to London to Asia.

So, why?

The answer begins with an important reminder: the stock market is not a measure of how average Americans are doing. It is a measure of what investors believe companies are worth based on their current and future earnings. And right now, corporate America is doing pretty well.

Profits remain remarkably strong, first and foremost. Per Charles Schwab, first quarter earnings for companies in the S&P 500 were up about 28% year-over-year, which is a remarkably robust rate of growth. At the beginning of the year, analysts were projecting 15% growth. Per Liz Ann Sonders from Schwab:

That 13-plus percentage point upward revision is one of the more pronounced positive intra-quarter upgrades in recent cycles and reflects a combination of genuine outperformance—particularly in the Technology and Communication Services sectors…

…So far during this reporting season, both the earnings and revenues beat rates have moved higher and are tracking well above historical medians. Absent a significant shift in the macro landscape, it’s expected that earnings growth can remain strong in the second quarter.

Most of the largest companies in the stock market operate on a global scale, meaning their fortunes are not tied exclusively to the health of the American consumer. Companies such as Apple, Microsoft, Alphabet, Amazon, and Nvidia generate revenue from around the world. Their earnings are influenced by global demand, technological innovation, and productivity gains as much as by what is happening in any particular part of the U.S.

But among those variables, productivity gains and expense reductions are the two key points here. Businesses have been aggressively managing costs, and, of course, to many businesses, one of the most significant costs is labor. Businesses large and small have been managing their expenses through hiring freezes, layoffs, and automation, including the sudden and robust implementation of AI. Those decisions may create anxiety for workers, but they generally improve profitability, for better or worse, for companies.

The rise of artificial intelligence has only accelerated investor enthusiasm. Whether AI ultimately transforms the economy as dramatically as its proponents claim remains to be seen, but investors are increasingly betting that many companies will be able to produce more output with fewer workers, which will lead to higher stock prices.

In Q4 of 2025, 331 earnings calls among S&P 500 companies saw their CEOs mention “AI,” an all-time high. My belief on this is that AI is, indeed, being implemented in widespread ways, so of course it is going to be noted in earnings reports. But executives are almost compelled to discuss AI in order to meet investor demands for AI implementation, or at least to signal to the investor community that they are mindful of the productivity gains and expense reductions that can be potentially found therein.

The irony is that at a time when Americans are most pessimistic about their long-term job prospects due to AI, corporate America is not only embracing it, but signaling their adoption of it as a way to attract and retain shareholders and, ultimately, to boost their share prices.

AI productivity gains and personnel reductions are not the only factors at play, of course. Most notably, an increasingly business-friendly regulatory environment that is more permissive of mergers and acquisitions, less concerned about monopolies, and more willing to reduce red tape and restrictions on various types of business activity have all helped lead to a generally less regulated business landscape. These topics are all a bit beyond the scope of today’s article, but worth mentioning for sure, as AI is the headliner right now, but the more permissive business landscape under current leadership in Washington D.C. is a major factor, as well. Some aspects of deregulation may be even more impactful on certain industries over the long haul than AI, in fact.

One additional quick note: AI-related stocks have done particularly well over the past few years, so much so that they represent a larger and larger portion of the S&P 500 as a whole. Not all 500 stocks in the index are weighted equally. Nvidia, for example, is just one company, but it represents about 8% of the index due to its size and stature. When the overweight stocks like Nvidia do well, which they generally have over the past 3-4 years, it helps pull the entire index along. Someday, if there is a sharp pullback in AI-related technology stocks, the overall index will correspondingly drop in an exaggerated way. For now, a portion of the gains in the S&P 500 index as a whole are attributable to certain industries, including technology, doing particularly well of late.

What About Regular Americans?

The question on the opposite side of the coin that should be asked alongside why the stock market is doing so well is why ordinary Americans are feeling so bad.

You might reasonably expect people to feel better about their own finances thanks to swelling balances in their investment accounts, especially retirement accounts. In fact, more Americans are invested in the stock market than ever before. When Ronald Reagan left office at the tail end of the 1980s, most Americans had little direct connection to Wall Street. In 1989, only about one-third of U.S. households owned stocks either directly or through retirement accounts. Today, however, roughly six in ten Americans have money invested in the market. Much of that shift is attributable to the rise of the 401(k), which transformed millions of workers from wage earners into investors and tied household finances more closely than ever to the fortunes of Wall Street.

But there are two main reasons why the four-year stock market surge we have seen in recent years is not leading people to feel better about their finances or the economy. First, retirement savings are meant to be just that: money for retirement. A 20% jump in a Fidelity 401(k) is certainly better than a 20% drop, but to a 30-year-old young professional trying to buy their first home, to a 40-year-old single parent struggling with grocery prices, or to a 50-year-old office worker wondering what AI might mean for their career, the health of a retirement account is not necessarily among their top financial concerns. That money feels distant. It is real, but it is also largely inaccessible. It sits behind age requirements and early-withdrawal tax penalties, while today’s bills arrive with remarkable punctuality. A rising retirement account may provide comfort, but it does not help much when housing costs, healthcare expenses, childcare bills, and everyday necessities are consuming a growing share of a family’s monthly income.

Second, although more Americans are invested in the stock market than ever before, stock ownership remains highly concentrated. By some estimates, the top 10% of households own roughly 90% of all stocks. That means that while millions of Americans participate in the market, the overwhelming majority of gains accrue to a relatively small group of investors. This mathematical reality has contributed to an increasingly wide asset gap.

Consider two hypothetical investors. One has a portfolio worth $5 million. The other has a retirement account worth $30,000. If the market rises 10%, the first investor gains $500,000 while the second gains $3,000. Both investors earned the same return. Both benefited from the same market. Yet one gained more wealth in a single year than most Americans earn from working full-time for that same 12-month period.

Through the miracle of compounding, the gap widens even further over time. The investor who now has $5.5 million in this hypothetical example enters the following year with a much larger base from which to grow. The investor with $33,000 benefits from compounding as well, but on a dramatically smaller scale. The result is that a rising stock market can simultaneously improve financial outcomes for millions of Americans while dramatically increasing the wealth of those who already possess substantial assets.

What Does It All Mean?

I hope long-time readers will appreciate that I am not prone to hyperbole and generally try to keep a balanced perspective on things. That said, this level of economic inequality is the stuff of revolutions. The French Revolution is perhaps the most famous example. By the late eighteenth century, France’s aristocracy enjoyed enormous privileges while many ordinary citizens struggled with rising food prices, stagnant wages, and financial hardship. The revolution that followed was driven by many factors, but economic inequality and a growing perception that the system was fundamentally unfair were central themes (sound familiar?).

The Russian Revolution emerged under different circumstances but followed a somewhat similar pattern. Vast disparities between elites and ordinary workers and peasants created fertile ground for political upheaval. More recently, elements of the Arab Spring were fueled by economic frustration, particularly among younger generations who increasingly felt shut out of opportunity while politically connected insiders prospered.

History never repeats itself exactly, but it often rhymes, as the saying goes. When large numbers of people conclude that the economic system no longer works for them, political movements emerge that promise dramatic change. Sometimes those movements are constructive. Sometimes they are destructive. Almost always, however, they are disruptive.

Am I suggesting that the United States is on the precipice of an eighteenth-century-style revolt complete with guillotines in the town square? Not really. But it should not surprise anyone that populism is gaining strength across much of the developed world, and its growing from both the traditional political left and the political right.

On the political right, movements have emerged that rail against elites, institutions, globalism, and entrenched power structures. On the political left, many leaders have increasingly focused their attention on billionaires, corporations, concentrated wealth, and economic inequality. The details differ, but the underlying frustration often comes from the same place: a growing belief that the people making the rules are benefiting from a system that is leaving everyone else behind.

And perhaps that brings us back to the remarkable milestone that occurred this week. The stock market is reflecting the reality of a highly profitable, technologically advanced, globally connected economy that continues to generate enormous wealth. Consumer sentiment is reflecting the reality of millions of Americans who feel squeezed by housing costs, healthcare costs, childcare costs, grocery bills, and uncertainty about the future.

The danger now is that more and more Americans may come to believe these stock market records have little to do with their own lives. If that perception continues to grow, the real story of 2026 may not be the remarkable strength of the markets, it may be the widening gap between those who own a meaningful share of America’s assets and those who simply work in its economy. And that gap, far more than any market correction or recession, may prove to be the defining political and economic challenge of the next generation.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Author’s Note: Greetings from the hotel lobby of the Residence Inn in Nashua, New Hampshire, where for the fourth straight Saturday night of Memorial Day Weekend I sit in the aftermath of a full day of soccer with my over-sugared kids sleeping upstairs (hopefully) while I finish off this week’s Sunday Morning Post article downstairs. I have literally sat at the same corner table in this exact hotel lobby with NBA playoff basketball on the TV near me each of the past four years. Strange as it may sound, the continuity of this unique Memorial Day Weekend tradition brings me a strange sense of peace.

I’m happy to have these moments with my son and our somewhat reluctant daughter and younger son. I read an article recently that kids remember family vacations vividly well from age 6-12, and trips and family vacations are like emotional anchors for them as they get older. This weekend isn’t exactly a vacation per se, but it makes for some nice family time in what has become an annual tradition.

I’m still working on Part II of my AI series, so stay tuned for that hopefully next week. There was some rare housing news from the nation’s capital this week, so that’s the topic for today. I hope everyone has a nice Memorial Day Weekend and a good start to the summer. Thank you for being here and thank you for reading The Sunday Morning Post.

A Housing Bill Surprisingly Works Its Way Through Congress

One of my first political science courses in college took as its semester-long theme the concept that all politicians are basically motivated by one thing: their own political survival. Every vote they take, every statement they make, even the very things they believe are all shaped around the goal of winning elections and staying in power.

The survival instinct for some, perhaps, is that you need to win elections in order to exert influence. I guess the charitable interpretation of that is that if you have values that you believe will be good for others and for the world in general, you need to win elections in order to advance them. But for others, it is the perks and prestige of their positions for reasons of ego and perhaps some degree of sociopathic need that motivates this political survival instinct. The latter perspective is a cynical take, for sure, but perhaps not without truth.

Election years can make for strange political bedfellows, as typically obstinate combatants will sometimes unite around their shared need for survival. Such is the case now, where perhaps the most significant housing bill in a generation has unexpectedly garnered wide bipartisan support in the House of Representatives. The bill is the 21st Century ROAD to Housing Act (H.R. 6644). Congress loves an acronym; this one is Reform, Opportunity, Affordability, and Development. Surprisingly, the ROAD Act has traction, and it looks like some version of it may make it into law.

So we’ll look at what’s in the ROAD Act because the ideas and proposals therein are significant, but first, why has housing reached the floors of Congress as a top policy priority? It is exactly because the topic has such broad bipartisan support. Per recent polling from the Bipartisan Policy Center, 79% of Americans identify housing affordability as a top issue, and 63% of voters say they would be more likely to vote for someone if they helped pass legislation to make housing more affordable. A recent Ipsos poll found the top concern for American voters this year continues to be rising costs, with healthcare as the top concern, followed by housing as #2, and then food #3. The high hurdles for first-time homebuyers to get into the market, still-high and rising construction costs, long-term frustrations with rising rents and lack of options, rising interest rates, and even the complex questions of homelessness are all housing-related frustrations shared by wide swaths of American voters and among those at all points of the political spectrum.

I started out this week’s article with a cynical perspective on electoral and legislative processes, but let me flip this question on its head: isn’t this how Congress is meant to actually work? Americans have identified housing as a top concern, and now their representatives in Washington are working on it. It almost feels quaint and old-fashion that, maybe, just maybe, this is how it is supposed to go!

So What’s In it?

There is still a long way to go for the ROAD Act to become law. A similar bill is being debated in the Senate, so most likely the two bills will be reconciled so that one shared bill will move forward. That process sometimes waters down key provisions to make them palatable to members of both bodies, which can take the teeth out of the original intent. Whatever bill does emerge from Congress then needs to go to the White House for President Trump’s signature. It’s anyone’s best guess as to what happens there, although to be fair Trump has made a series of key statements on housing this spring including expressing a desire to limit Wall Street purchase of single-family homes. It’s funny how certain far left progressive priorities often end up finding support on the right; in a populist sense, the far left ends up connecting with the far right in some unexpected ways, making the political spectrum look more like a circle, or at least a horseshoe.

Anyway, one of the other surprising things about the ROAD Act is that there are some pretty serious, thoughtful, and impactful pieces to it. It actually might change things! Here are the key parts:

1. Restrictions on Large Institutional Investors Buying Single-Family Homes
This is the provision grabbing the most headlines. The Senate version of the ROAD Act would place major restrictions on large institutional investors purchasing additional single-family homes. The bill targets massive firms that own hundreds of homes, not mom and pops or individual real estate investors with a few rental properties. The underlying political argument here is simple and broadly popular: homes should primarily be for people to live in, not financial assets for Wall Street portfolios. Whether this provision would meaningfully lower prices is heavily debated, but politically it is easy to understand why it resonates with voters on both sides of the aisle frustrated by bidding wars, anonymous corporate buyers, and cash offers from giant investment groups.

2. Zoning and Land-Use Reform Incentives
The ROAD Act also attempts to tackle one of the core drivers of America’s housing shortage: local zoning restrictions. Rather than directly overruling cities and towns by mandating what guidelines local communities must enact, Congress is trying to encourage reform through incentives. The bill promotes ideas like reducing minimum lot sizes, loosening parking requirements, allowing duplexes and accessory dwelling units, and encouraging higher-density housing near transit corridors. If cities and towns comply, they could receive priority treatment for certain federal grants and planning funds.

3. Streamlining Environmental and Permitting Reviews
One of the least glamorous but perhaps most consequential sections of the bill deals with permitting reform. Housing projects in many parts of the country can spend years tangled in environmental reviews, bureaucratic processes, lawsuits, and local hearings before construction even begins. The ROAD Act attempts to speed this up by modernizing and streamlining review processes connected to HUD-funded housing activity. Supporters argue that excessive delays add enormous costs to housing construction (and I would say it blocks some projects from even getting launched because developers just don’t want to deal with the bureaucratic frustrations). On the other side of the coin, critics here do worry about weakening environmental oversight and limiting opportunities for public input. But regardless, Congress is clearly signaling that current processes are too slow and too expensive, a perspective I am sure most developers (certainly the ones I have dealt with over the years in my banking career of financing these types of projects) will agree with.

4. Manufactured and Modular Housing Expansion
Another major theme of the legislation is reducing barriers to manufactured and modular housing construction. For decades, manufactured housing has carried an unfortunate stigma despite offering one of the cheapest ways to add housing supply quickly. As I wrote about a few years ago, the Sears Catalogue homes aren’t coming back, and the closest modern alternative may be mobile homes. The ROAD Act attempts to modernize outdated rules that make factory-built housing harder and more expensive to deploy. The White House itself specifically highlighted this portion of the bill as one of its priorities, arguing that removing unnecessary restrictions could dramatically lower building costs. Again, it is fascinating that Trump is zeroing in on manufactured homes, when tenant ownership of mobile home parks and more flexibility for permitting and construction are simultaneously growing as key issues on the political left.

5. Incentives for Office-to-Housing Conversions
The pandemic permanently altered downtown America. Many cities are still struggling with half-empty office towers and declining demand for commercial real estate. The ROAD Act includes provisions encouraging the conversion of vacant commercial buildings into residential housing. This is one of those rare policy ideas that seems to satisfy almost everyone ideologically: urban planners like it, housing advocates like it, downtown business groups like it, and environmentalists often prefer redevelopment over endless suburban sprawl. Although from many of the developers I have spoken with over the years, it’s much harder than one might think to convert an office building into an apartment building (perhaps a topic for a future article), so we’ll have to see what kinds of incentives the ROAD Act provides to make these types of projects more feasible and therefore more common.

6. Transit-Oriented Development
The legislation also tries to better connect transportation and housing policy. The basic argument is that if taxpayers are spending billions on rail stations, highways, and transit systems, it makes little sense to prohibit housing construction near those investments. The ROAD Act encourages higher-density housing near transit infrastructure while discouraging some of the parking mandates that often make projects more expensive and less feasible.

7. Pre-Approved and Standardized Housing Designs
This is one of the provisions that most interests me, and it is an idea I honestly have never thought of before. One underappreciated contributor to housing costs is the sheer complexity of local approvals and building design requirements. The ROAD Act includes support for pre-approved housing plans and standardized designs that could significantly reduce permitting timelines and architectural costs for smaller developments, duplexes, ADUs, and starter homes. It is not a flashy provision, but it reflects a broader philosophy running throughout the bill: America does not just have a housing shortage problem; it has process problems running through city and town halls and state legislative bodies in all fifty states. Although people like their local control, this idea seems like a good one to help streamline some of these frustrating processes, which can also be very expensive, which then, in turn, raises costs for both builders and end-users (i.e. homebuyers) alike.

What It All Means

Taken together, the ROAD Act is notable because, first and foremost, it is an example of good policy actually working its way through the halls of Congress. Congress doesn’t actually pass that many bills, and the ones they do are often baked into massive omnibus bills with many different parts. So, again, it would be a great success if this bill actually reaches the finish line (even if parts do get watered down by a reconciliation with the similar bill running through the Senate).

Secondly, the ideas at play here do not come entirely from the political left or the political right. Parts of it sound traditionally conservative: deregulation, streamlining, cutting red tape, and loosening zoning restrictions. Other parts sound more populist or progressive: limiting Wall Street ownership of homes and expanding affordable housing initiatives. Undoubtedly that ideological blending is precisely why the bill has momentum. Indeed, two of the Senate’s strongest proponents of their proposed housing bill are Senator Tim Scott, who is a Republican from South Carolina, and Senator Elizabeth Warren, who is a Democrat from Massachusetts.

Housing has become one of the few issues painful enough, visible enough, and universal enough to force politicians from both parties into the same room. Even if the policies are overdue and the bills may be watered down before they make it into law, there are still reasons to feel good about the ROAD Act and the changes the provisions could make to U.S. housing policy.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Here is a quick video of my son scoring a goal in one of his games yesterday, complete with a bow and arrow celebration. I’m not sure exactly where he pulled that from. Unfortunately the game result was a loss, but there were some good moments, and we love coming down for this tournament each year.

Have a great week, everybody!

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Author’s note: for those who have come to The Sunday Morning Post today looking for Part II of my AI miniseries after last week’s Part I: The Dove Case on AI, it’s not ready yet. It’s a complex topic and I want to give it a comprehensive effort prior to publishing. So instead, I’m calling this article up from Triple-A to get a spot start in the rotation. Thanks for being here and thanks for reading The Sunday Morning Post.

Why and How Some States Don’t Have an Income Tax

It’s political season here in Maine and, indeed, around the country. One candidate in the Maine Republican primary for governor, Bobby Charles, has called for eliminating the state income tax over the course of four years. This idea has come up in the past here in the Pine Tree State, most notably from previous governor Paul LePage, who did not succeed despite multiple calls and attempts to eliminate Maine’s income tax. The only meaningful income tax adjustment during his eight years as governor was a reduction in the top marginal income tax bracket here in Maine from 8.50% to 7.15%.

Campaigning on eliminating the income tax is one thing. Actually doing it is entirely another. Maine’s income tax, for example, provides about 50% of the revenue the state government needs to operate. The loss of such a significant source of revenue would require a combination of two things that happen to be quite unpopular if not completely impracticable: major cuts to services or significant expansion of other taxes, including the sales tax, property taxes, and the meals and lodging tax. Many people like the idea of not having a state income tax, but they don’t end up liking the tradeoffs that would be necessary to make it happen, which is why it is nearly impossible for states with an existing income tax to eliminate it altogether.

How Some States Do It

And yet, despite the seemingly impossible tradeoffs, some states have achieved an elimination of their state income taxes altogether. Several states have never had an income tax. How have they done it?

The nine U.S. states that do not currently tax wages and income are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. No two states here are exactly the same in terms of how they tax and spend; there are unique attributes to each. Yet there are some themes in common, including higher taxes on consumption instead of earnings, and unique taxes based on the individual economic attributes of each state.

Two or three of these states are truly unique, and are able to avoid an income tax for reasons that are completely non-replicable for other states. Take Alaska, for example. First and foremost, Alaska has a population of about 740,000 people, which makes it the 48th most populous U.S. state, ahead of only Wyoming and Vermont. Even in a remote state where a vast geography creates some complexities in terms of providing services, state government there is not particularly expensive given the low population.

But the real thing that makes Alaska different is how they tax oil and gas extraction. Oil companies that drill in Alaska must pay a combination of lease payments for drilling, “severance taxes” on the oil being removed, and royalties based on the value of what is produced. Because the Alaska state government owns large amounts of mineral-rich land and has a relatively small population, these oil revenues have historically generated enormous amounts of money for the state treasury, which are used to pay for state government in lieu of income taxes.

Even on top of that, in 1976, Alaska voters created the Alaska Permanent Fund to preserve a portion of the state’s oil wealth for the future. A share of oil-related revenues is deposited into the fund each year, which is then invested, essentially functioning like an endowment. The state uses investment earnings from the fund to support government spending and to provide annual dividend payments to all Alaskan residents. So not only does Alaska not have a state income tax, they have this fund that actually pays out dividend checks to residents annually. Pretty cool. Today, because of such strong investment growth in this endowment-style fund, more of state government is funded by the investment earnings than from actual new oil and gas tax revenue.

In case you’re wondering, the Alaska dividend to residents is usually about $1,000 per year, and to be eligible you must have lived in Alaska as a resident for the entire 12-month period prior to the calendar year for which you would get the dividend. So if you move to Alaska later this month, dear reader, which sometimes doesn’t feel like such a bad idea with the state of the world right now, you wouldn’t be eligible for the 2026 dividend; you would have to stay and live there through all of 2027 and then you would be eligible for the 2027 dividend, payable in early 2028.

What About the Other Eight States?

Texas and Wyoming both have something similar to Alaska, although neither is as extensive or comprehensive a funding source for those state governments as the array of Alaska gas extraction taxes and royalties. But in Texas, similar to Alaska, they impose extraction taxes on oil and gas companies to the tune of 4-8% of the market value. When drilling takes place on state-owned lands, the amounts can go up to 20-25%. These funds help to fund state government, with a significant portion going into a Permanent School Fund, which has become one of the largest educational endowments in the country and helps to fund Texas state public schools. Wyoming has something similar, albeit on an even more limited basis.

But oil and gas revenues only fund a portion of what is needed to fund government. The state sales tax in Texas is 6.25%, and cities and counties can impose an additional tax up to 2.00% with revenues kept local. Take Austin, Texas, for example. The state sales tax throughout all of Texas is 6.25%, and Austin has an additional 2% local tax, making the total sales tax burden in Austin 8.25%.

Property taxes are also quite high in Texas, relatively speaking. According to the Tax Foundation, the effective property tax rate in Texas on average is about 1.40%, which makes it the 7th highest property tax rate in the country (the average Maine rate is about 1.00% by the way, which puts us 19th on the list). Hawaii is the lowest property tax state at just an estimated 0.3% rate; Hawaii state government is largely funded by a combination of sales, hotel, airport, and excise taxes, although it should also be noted that Hawaii real estate values are higher than almost anywhere else in the country, so a 0.3% rate on a high-priced home can still be a meaningful dollar amount.

New Hampshire, which is one of the nine states without an income tax, is also among the highest property tax states, ranking 5th overall according to the Tax Foundation. New Hampshire has a political ethos similar to that of Texas (and maybe Alaska, too) of being willing to forgo some services in the name of personal autonomy and more limited government oversight (i.e. “Live Free Or Die,” “Don’t Mess With Texas.”). But, indeed, a lot of the burdens of paying for government are pushed to the local level through property taxes in New Hampshire.

New Hampshire is particularly unique in that not only is there no income tax, there is also no sales tax. That said, New Hampshire does arguably “hide” what might fairly be considered a partial sales tax by taxing certain activities and services even if they don’t technically call it a “sales tax.” New Hampshire taxes meals and lodging, gas, tobacco and alcohol, and vehicle rentals more significantly than many other states, for example.

The Rest of Them

Of the remaining states with no income tax (Florida, Nevada, South Dakota, and Washington), there is a broad theme of taxing consumption rather than wages. Florida, for example, has a high sales tax and especially notable taxes on tourism (e.g. meals and lodging and rental car fees, etc.). Nevada also has high sales and tourism taxes, plus gambling and casino revenues. Washington State has one of the highest sales taxes in the country, topping out around 10%. There are a lot of high earning workers in the Seattle tech industry who are probably especially happy to not have an income tax there. For many, working in Seattle as opposed to, say, California, might represent a 7-10% advantage on pay. In California, the state income tax starts at 1-2% for low-wage earners, but quickly hits 9.3% for income over $70,600 (for single filers), and goes all the way up to 10-12% for those making $360,000 and above. Not having an income tax in Seattle is a real comparative advantage for tech companies trying to attract workers.

Tennessee also has a high sales tax, which can run around 9-10% based on additional local sales taxes.

South Dakota is probably the most benign state of the group. There is no income tax in South Dakota, property taxes are ranked around the middle of the pack for the country, and sales taxes run from 4.2-6.2% depending on local options, which is hardly exorbitant, especially compared to the 10%+ in Washington and Tennessee. South Dakota is probably the one example of where the tax burden from having no income taxes isn’t completely shifted to other taxes, it is just that the state government in this conservative and sparsely populated state is just not as expensive as it is elsewhere.

The Implications

Most of the states without any income tax have been that way for quite some time, and in some cases, forever. It may sound obvious, but it is easier for a state to not have ever had an income tax than to try to convert itself into one now. The reasons for that are political and logistical. As I mentioned at the outset, the income tax in Maine represents about half of state revenues. It is easy in a political stump speech to decry wasteful spending and to advocate for shrinking the size of government. Lots of people are amenable to that. After all, no one is in favor of wasteful spending.

But the practical realities of cutting half of state spending are harsh. You would quickly have to eliminate services that many people rely on, which would put a real hardship on many of the same constituents who would be voting for you (or not) as their candidate for governor or a member of the state legislature.

Unpopular, too, would be raising taxes or creating new fees on other things. Very few people want to pay more in sales taxes, for example, and the tourism and hospitality industries come out in full force against any proposed increases in the meals and lodging tax. I suspect very few people have ever decided not to visit a place due to an add-on to their bill for a local or state lodging tax (we have all seen them on our hotel bills when we visit other places), annoying as they might be. But nonetheless, there is a constituency and a lobby group ready to pounce on any new fee or tax that could be detrimental to their industry whether that’s hotels, restaurants, ski lodges, race tracks, or whatever other industry you could name.

The other implication here is that among the fifty states, there are some wild inconsistencies in how residents, visitors, and businesses are taxed. This is a reflection in the federal nature of our government, which has always granted significant decision-making to the states. This system of state and local control within a national framework results in a patchwork system of taxation that varies from state to state.

Many of these tax structures are highly regressive, by which I mean that for those with less resources, a greater portion of their assets is taxed through a sales tax than an income tax. True, most states absolve many of the fundamental needs of living from taxation, including groceries, utilities, and rents, but if you are a low or moderate income mom or dad in Washington State and your kid needs new shoes, the 10% sales tax is hitting your resources disproportionately harder than it is hitting a Seattle tech worker mom or dad who is making $500,000/year. As the low-income parent, you’d generally be better off with a more progressive income tax where your low wages are taxed at, say, 0-2%, while the tech worker is getting taxed at an average state income tax rate of, say, 8%, which is about what it would be two states to the south in California, and you both paid a lower sales tax.

But again, states get to decide on these questions, and elected officials in every state are going to do what they think is best, but also what their constituents (and their campaign donors and lobbyist influencers) want.

So does the income tax matter on where people choose to live? I can tell you anecdotally in my work as a banker that I have several high earning people who ostensibly are based in Maine, but have either Florida or New Hampshire residency for six months plus a day each year so they avoid Maine income taxes. It may sound crazy to go through all that just to save on taxes, but for someone making $500,000 in wages in Maine, they pay around $34,000/year in state income taxes. The incentive to claim residency elsewhere is high.

According to the U.S. Census Bureau, the top two states for in-migration in 2024 and 2025 were Texas and Florida, which are among the nine no-income tax states. For sure, there are plenty of other reasons why people would choose to move to these states besides the tax structure (the weather, chief among them), but I think there is certainly evidence that people are fleeing high tax states like California and New York for these comparatively lower tax rate states. Austin, Texas, has become a major tech hub and has absorbed a lot of people exiting the higher tax and higher regulatory atmosphere in California, specifically. Washington and Tennessee are also in the top ten states for in-migration, and, as noted above, are both no income tax states, as well. The third best state for in-migration is North Carolina, which has a flat tax of 3.99% on all incomes, and the rate is scheduled to drop to 3.49% in 2027.

The decisions that millions of Americans make each year on whether to move and where to move to are fascinating from a sociological perspective, and worth diving into more deeply at some point. For now, my main conclusion today is that there are a number of reasons why some states do not have an income tax, and it is rarely as simple as just saying those states are either much better at limiting wasteful spending or that they have some type of creative accounting that lessens the tax burden overall. The reasons, in reality, are a combination of unique revenues that can be generated from taxing natural resource extraction, and in other cases, heavy taxation on consumption, particularly in tourism-rich areas of the country like Florida, and to a lesser degree Nevada, Texas, and Tennessee.

Here in Maine, calling for the elimination of the state income tax may help Bobby Charles ride to victory in the June Republican primary for governor, where he is facing several other candidates who have called him out on what they view as unrealistic claims to be able to do so. My prediction is that he will, indeed, win the primary, but will not likely win the general election in what is shaping up to be a blue wave year nationwide. He will be even less likely to actually succeed in eliminating the income tax if he does find himself in office.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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What if everyone in the world could get access to the best doctors? That was the question posed by a speaker at an AI conference I recently attended. What if someone could be met with, diagnosed, treated, and tracked after the fact by an AI physician who possessed the sum total of human knowledge inside of its processing unit. The AI doctor could synthesize millions of pages of medical research, quickly weigh all possible causes and implications of an illness or disease, and develop a tailored treatment plan based on the entire health history of that patient. Since software is replicable, AI doctors could be deployed into rural and underserved areas not only here in the United States but around the world that might have limited or non-existent medical services otherwise.

There is already evidence that AI scanners can detect cancer in patients much earlier and with far greater accuracy than can the human eye. AI tools are being used to reduce administrative burdens (and costs) in hospitals and other healthcare settings, again, often with greater accuracy than humans. AI is being used in medical research to pursue cures for cancer and the development of new medications. Scientists armed with AI can quickly identify the most promising chemical reactions much earlier in the research cycle and at much greater volume and breadth.

Healthcare is just one setting where the promises of AI are truly astounding, with all sorts of positive implications for humanity’s future. Many other industries hold similar opportunities. There are reasons to be really excited about this new world we are entering.

Today’s article is Part I of a three-part series. I have written several times over the past year about AI, and my tone has been generally cautious if not worrisome. The impacts to the labor market, not to mention the effect that all of this technology has on our brains, are impossible to ignore. But I’m not an AI doomer, by any means, which is the term for people who expect catastrophic implications for humanity due to AI, including the possibility of actual human extinction.

Part I today takes an optimistic look at AI. Part II will take the bear case for AI. I’m putting a pin in this aspect of the conversation for this week, but what happens to all the billing specialists, for example, in hospitals when their human work becomes obsolete? What happens when entry-level data analyst positions are eliminated in research labs and other scientific facilities? How do you get a PhD-level biomedical researcher if the gateways into those careers are eliminated for lack of need of human beings to do those jobs particularly at the outset? How do people provide for themselves in a world where human labor is not required, even as so many traditional industries continue on, just without the need for their human workers? These are not small questions or ones with clear and easy solutions.

But we’ll come back to those. Part III will discuss the policy implications of all of this, and why we need to be way further ahead in our discussions as a society (and, actually, as a species) about what this is all going to mean for us. And to be clear, I don’t have all the answers, and part of my writing in these three articles is just to get my own thoughts organized and onto the page. This will need to be a collaborative and thoughtful discussion over the next several years by policymakers and ordinary people alike at all levels of government and society and in all corners of the world — if we even have a few years to debate and plan.

The Glass Half-Full Future

More comprehensive medical care and accelerated research for cures on some of our most intractable diseases and afflictions are high-profile causes for optimism about the AI future. But there is plenty more to discuss here.

One of the most upbeat assessments I have seen about AI’s impact on the labor market is that these tools will close the gap between lower and upper skilled workers. Consider the organization and synthesis of data. What might have taken an experienced analyst several days to pore through and address can often be done in just a few minutes by knowing the right phrasing to submit into the AI prompt. That still requires some baseline knowledge of what questions to ask and then how to interpret the results, but the skillset needed to quantitatively digest the data is much different. And, actually, what that means is that more people, not fewer, will be able to do it.

What could be one of the most consequential results of the ubiquitous rise of AI in our lives is the democratization of expertise. I mentioned in a previous article how I heard a presenter at a conference say, “The economic value of intellectual expertise will soon be $0.” This was not just any random speaker, either; it was Dr. Anton Korinek of the University of Virginia, who is quickly becoming one of the foremost national experts on the intellectual and economic implications of the AI boom.

For most of human history, access to high-level expertise has been limited by geography, cost, and social capital. The best doctors went to elite universities and then ended up in big cities. The best attorneys and consultants charged rates inaccessible to ordinary people. Entire categories of knowledge and assistance existed behind velvet ropes that most of humanity simply could not access.

AI has the potential to radically flatten that reality. A person in rural Maine or rural Kenya may soon have access to educational support, legal guidance, medical triage, financial planning, translation services, and technical assistance at a level that previously would have been practically impossible for many to obtain.

I’ll give you a much more tangible and simple example on this. I will always believe strongly that writing, original thought, and authentic human perspective will remain enormously valuable (I hope so, anyway). In fact, they may become even more valuable in a world flooded with AI-generated slop content. But AI also lowers the floor for ease of communication. Someone who struggles to organize their thoughts into a coherent email or policy proposal can now communicate more clearly and professionally with the help of AI. This matters for people’s careers, and therefore their livelihoods.

Communication has always functioned as a form of economic leverage. AI may narrow some of those gaps by helping ordinary people express themselves more effectively. Let me give you an example: I have a colleague who is not necessarily the best writer. But part of her job responsibilities include communicating reports to upper management on all manner of key topics. So what this colleague now does is run every email and report through ChatGPT prior to sending and asks it to correct typos, improve grammar, and adjust it for a more professional tone. I doubt management knows she does this, but even if they did, they probably would not care, as her communications are unquestionably better than they were previously. She uses a completely free program (ChatGPT) that virtually anyone with access to the internet can employ, and it’s probably taken her writing level from that of a high school student equivalency to a that of a mid-career professional. AI is not threatening her job (at least not at the moment); she is using it to enhance it.

The Frustrations of Modern Life

A more subtle way that I think we will all benefit from AI is by streamlining the ordinary tasks of everyday life, or eliminating many of the frustrations associated with these responsibilities almost altogether. The most profound effects of AI may not come from robots or futuristic laboratories, but from thousands of tiny frictions disappearing from everyday life.

I think an interesting exercise would be to keep a running log of every task over the course of a week that, if it were eliminated, would make one’s life notably better. Writing routine emails. Navigating billing systems. Translating jargon into plain English. Filling out government paperwork. Waiting on hold. Will improved technology including through the use of AI agents not markedly improve the human experience when engaging with these tasks? I suspect yes. I get that we all tend to prefer human interactions in many contexts. But the ideal-case scenario with AI is that perhaps humans will still be involved, but with improved systems in place through the use of high-level technology to reduce the friction in all of these types of everyday interactions.

It’s natural to be worried about AI, particularly as the strongest proponents of this technology right now also have a specific and significant financial interest in having fairly permissive and wide-sweeping uses with limited government oversight (more on that in Part II). But the most optimistic AI case is not merely about profits or even human productivity, it’s about expanded human capacity for performance and, yes, for human thriving. It’s about reducing wasted time, widening access to knowledge and expertise, and accelerating discoveries.

Every transformative technology arrives with disruption attached to it. People have predicted humanity’s doom at the outset of electricity, of bicycles, of radios, of television, of video games, of the internet. It is at least possible that future generations will look back on this era the same way we look back on the arrival of those other new things: messy, destabilizing, frightening at times, but ultimately civilization-altering in ways that dramatically expanded human potential. And that is, indeed, a reason for hope.

Addendum - An Updated Overview of How I Use AI

As mentioned above, I have written about AI several times over the past year in The Sunday Morning Post, including in July 2025 when I wrote about how I use ChatGPT. I would characterize my own tone and temperature on AI as being at times curious, sometimes amazed, at times cautious, but generally sort of sour on our human prospects in the age of AI. I’m going to put a pin in most of that until next week, because there are a lot of reasons to be pessimistic, not least around the labor market impacts and a potential jobs wipeout. But let’s come back to that.

Even on the jobs front there are reasons for optimism, however. Industries adapt. Try explaining to someone in 1926 what the job of a computer programmer would be. It would have been impossible because the very understanding and vocabulary for what a computer was let alone the nature of software and coding were completely non-existent. Are we so arrogant in our current generation to assume that all the jobs that will ever be done by human beings have already been created? What jobs in the year 2126 will exist that we have no vocabulary for today?

I use AI almost every day, although I am still what the AI industry would categorize as a “casual user.” I am not using it to write code, or to design websites or apps. I’m not employing what most experts believe is the next and most significant phase of AI to date, which is “agentic AI.” By that, I mean that AI bots are not proactively and with discretion doing tasks on my behalf the way a true assistant or representative of me or my company would do. That is coming, though, in all types of industries and careers (and maybe even my own).

The most common (and, indeed, daily) utilization of AI for me is to have ChatGPT up on a tab on my browser virtually all day long that I use as a research assistant and sounding board, and for perhaps the beginning of some agentic roles. Just this past week, for example, I used ChatGPT for the following tasks:

How to remove duplicate rows in Microsoft Excel. I had a large spreadsheet of all of my borrower names at the bank, with each row representing a different loan. But what I actually needed was just the borrower names, and if a borrower had more than one loan with us, each loan had its own row, which led to a lot of duplication in the report. This ended up being a very easy fix, I just didn’t know where to find the correct tool to do it in the busy and jargony Excel ribbon at the top of the page. The instructions from ChatGPT were clear, however, and it took me about 30 seconds to figure out from here. Below is a screenshot of exactly what it showed me:

• What the calculations were to convert Canadian dollars into U.S. dollars. And then, how to move money from a Canadian bank account into a U.S. bank account, but also how to move money from a U.S. bank account into a Canadian one.

• What the NAICS code might be for a particularly complicated business (each industry has a distinct six-digit code that banks report as part of their lending data. It helps the banks, and their regulators, to have a sense for how heavy they are in certain categories of lending). Most of the NAICS codes are pretty easy to identify: full-service restaurants, 722511. Rental properties, 531110. Hotels, other than casinos, 721110. But what about a physician in a very unique medical care area? I literally loaded this doctor’s website URL into ChatGPT, asked what the NAICS code was, and got the answer.

• Making a small change on a graphic I was using. Interestingly, ChatGPT asked me if I had the trademark rights to the graphic before making the change for me, and when I confirmed that I did, the program made the change almost instantaneously.

The other thing I generally use ChatGPT for is casual answers and discussion around questions that I might have taken to a CPA or attorney in times’ past, but that don’t quite rise to the level of needing true professional help (at least not yet). I suspect my CPA and attorney wouldn’t have even wanted to get bogged down in these relatively minor questions, so while they may have lost some billable hours (or billable increments of 15 minutes of time, anyway, in responding to me), I suspect they also will not miss this type of work if customers are able to handle a lot more of their housekeeping inquiries and low-level tasks themselves with the support of AI.

But my point is this: using AI to help with every one of the tasks above saved me time, money, and just as importantly, frustrations. I hate trying to figure things out in Excel, for example. I probably could have searched the taskbar in Excel and figured it out eventually, or Googled it and then interpreted the steps from some Microsoft-sourced website it pointed me to, but neither of those options were as simple as typing into ChatGPT, “How do I remove duplicate rows in Excel,” getting a clear answer with visuals instantaneously, and then executing it myself. It was 45 easy seconds versus 5 frustrating minutes, and if you’re a busy person with a lengthy to do list like I generally have, saving the net amount of time in that exchange and keeping your brain fresh for other tasks is actually worth quite a lot. And with apologies to the graphic design workers out there, being able to edit a logo myself in two minutes for free saved me perhaps several days of waiting and back-and-forth with a graphics person and perhaps several hundred dollars of expense (that being said, quite charmingly, citizens of Newburgh, Maine this past week did reject a logo change for the town because it was generated by AI, and they wanted something done by an actual human who lived in the community). Plus the AI logo also had mistakes in it. Per the Bangor Daily News:

The proposed Newburgh logo shows a pine tree, barn, cropfield and the date the town was incorporated. The AI-generated logo seems to be based on the town’s current logo, which also has a field, barn and Newburgh’s incorporation date. But the proposed branding has mistakes in it. The “I” in incorporated is written with the number 1, while the 1s in 1819 are upside down.

Oops.

If the rosy tone and warm temperature in this week’s article about our AI prospects as a species felt jarring to read, please do stick around for Part II, as there is another side of the coin to the optimistic outlook. In Part II, we will look more at the labor market, more at our brain chemistries, and peer down the road this all intuitively feels like it could go down, which is one with seismic tectonic shifts in our economic and social orders, and the possibility of true instability leading to nothing short of revolution. So stick around, we’ll be right back.

Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Because I research and write about housing and the economy pretty regularly, the algorithms constantly feed me content about these topics, and a meme I chuckle at every single time it hits my feed is a video of a group of 70-year-olds dancing on a cruise ship with the caption, “How Boomers feel selling their homes for $2 million after buying them in 1969 for 11 raspberries.” I can just hear my favorite Boomer readers harrumphing in response, “Well, maybe if young people today didn’t stop at Dunkin Donuts every day on their way to work, it wouldn’t be so hard to pay a mortgage.

As an Elder Millennial myself, I hope my Boomer friends and family will appreciate that my generation is fast becoming the target of the younger generations’ meme game. I was described recently as being “from the 1900s,” which is an equally sharp and amusing jab as the “Okay Boomer” meme that was popular a few years ago, or the 11 raspberries joke from today.

But I digress. The question of how hard it is to buy a home is one of the most common sources of intergenerational friction. Several years ago, I wrote an article comparing what it was like to buy a home in 2023 as compared to 1983. This was in response to people pushing back on the complaints of the younger generation by pointing out that when they themselves got started a generation or two ago, interest rates were much higher than they are today. So while today’s problems in the housing market are significant, they look different, and people buying homes in the 1970s and 80s had their share of challenges, too.

What I concluded in the 2023 article was that the two time periods actually have a lot of comparisons:

The average monthly mortgage payment today is only slightly higher than the average monthly mortgage payment in 1983, adjusted for inflation, even though home prices are a lot higher. And mortgage payments today as a percentage of individual income are exactly the same…

But the question of prices is a major one: remember, home prices are almost double today what they were in 1983, adjusted for inflation. This presents a high hurdle for younger homebuyers, those who are just getting started out, or traditionally underrepresented demographics in the home buying market, all of whom may not have had the time and opportunity to build up a nest-egg for a 10-20% down payment or to cover the ongoing costs associated with owning a home.

The general takeaway from the above (from the vantage point of 2023), is that in terms of Americans’ monthly cash flow, a mortgage payment in 2023 had a very similar impact to individual and family budgets as it did in 1983, but the hurdle for those just getting started out was greater in 2023 than it was forty years earlier.

I thought it would be worth a look at the analysis to see what, if anything, has changed since 2023.

The Key Variables

To get a clear look at this question, you have to look at three distinct variables. The price of homes (adjusted for inflation) is just one of them. The others are interest rates and incomes. Let’s start with prices.

Prices

The median home price today per the National Association of Realtors is about $408,800. In 2023, it was actually $416,100, so there has already been a move to the good for buyers in the past three years. When you consider that most goods and services have increased in price over the past three years, the fact that home prices have not is actually quite notable.

What about the early 1980s? I’m going to stick with looking at 1983 as it’s a fair anchor for defining “the early 1980s.” If I was picking the absolute peak moment of interest rates, it would skew the analysis (it would be October 1981, by the way). I’m going to stick with 1983 as a kind of an average, typical year in this time period we are looking at.

In 1983, the median home price was $74,900. Using the Bureau of Labor Statistics calculator to compare dollar amounts from different time periods, $408,800 today would be the equivalent of about $122,000 in 1983. Looking at the reverse calculation, the median home price of $74,900 in 1983 would be equivalent to about $253,000 today. It’s therefore about 60% more expensive to buy the median home today than it was in 1983, and this is adjusted for inflation. Score one for the would-be homebuyers of today in their case that things are more challenging here in 2026.

Interest Rates

On interest rates, I always enjoy sharing the following chart, which shows the history of the 30-year fixed rate mortgage going back over 50 years:

What a story that chart tells, from the huge surge in rates (peaking above 18% in 1981!) to the steady decline in rates over the course of the nearly 40 years that followed. If you want a fun trivia question to impress your nerdy friends who are into real estate, you can ask the question of what month represented the historical low for the 30-year fixed rate mortgage. The answer: January 2021, when the average 30-year rate hit 2.65%. I thank my blessed stars regularly that my wife and I closed on the home we live in now in July 2020, when rates were pretty close to the bottom, a lucky break of timing I wrote about a few years ago in a piece entitled, Dumb Luck and Golden Handcuffs.

Today the average 30-year fixed rate is 6.30%. So if you’re looking just at rates, things are far better today than they were in the early 1980s. In fact, here’s another trivia question that only a Sunday Morning Post reader might enjoy: following the early-1980s interest rate peak of rates being close to 19%, when did rates actually get as low as 6.30% again? Answer: not until the summer of 2002! People think rates are high today, and they are high relative to the recent 2020-2022 trough, but rates were higher than they are today for the entirety of the 1980s and 1990s.

Combining Prices and Incomes

If we combine the median home prices and the average interest rates in each time period, we can calculate the average monthly payment on a 30-year mortgage for each era and then adjust them for inflation, ending up with two figures that can stand up against one another.

First, using the 1983 numbers, the median home price of $74,900 with a 10% down payment results in a loan amount of $67,410. Using a loan calculator, the monthly payment on that amount on a 30-year fixed mortgage with a rate of 13.8% (the mid-year average rate in 1983), would have been $788/month.

Now, looking at today: the April 2026 median home price of $408,800 with a 10% down payment results in a loan amount of $367,920. Applying the current average interest rate of 6.30% generates a monthly payment on a 30-year mortgage of $2,277/month.

Comparing the two figures using an inflation calculator, $788 in August 1983 would be equivalent to $2,597 today. Looking at the reverse calculation, $2,277 in today’s dollars would be equivalent to $691 in 1983. It might take staring at these two numbers for a minute to figure out how they compare, but the conclusion here is that things were actually harder in the mid-1980s than they are today, with a larger average monthly payment for a typical mortgage in 1983 as compared to today.

But there is still one key variable to look at.

Incomes

The third variable that is necessary to include, and the one that is often missed when comparing prices across time periods, is incomes. According to the Bureau of Labor Statistics, the median weekly earnings nationwide in the first quarter of 2026 was $1,235/week. That works out to a median yearly income of $64,220, sweeping away regional differences and discrepancies between male and female and different rates and educational backgrounds (more on that below, though). The average mortgage payment for a median home today at an average interest rate of 6.3% is $2,277, or $27,324/year, which represents 42.5% of the average income.

Now, looking at 1983: the average weekly earnings in 1983 was $309/week, which totals to $16,068 for the year. The average monthly mortgage payment of $788 in 1983 represents $9,456/year, which is 58.9% of the average annual income in that time. Comparing the 42.5% of today’s income for the average mortgage payment with the 58.9% of average income from 1983 suggests that the more challenging period of time to buy a house and carry a mortgage was, indeed, the early 1980s, when a greater share of one’s personal income was going towards mortgage payments than it does today.

Considerations and Caveats

I chose to compare against the early 1980s because it is the time period people most commonly think of as being especially challenging for the homebuyer market. Other time periods would undoubtedly illustrate different conclusions. For example, let’s look at the math for twenty years ago, in 1996. The median home price in the second quarter of 1996 was $139,900, and the average 30-year rate was right around 8.00%. Using a loan calculator for 90% of the purchase price ($125,910) at an 8.00% interest rate generates a monthly payment of $924/month. This would be equivalent to $1,948/month today, so over $300/month lower in today’s dollars than it would be now.

That particular snapshot suggests that it is notably more challenging today than it was in 1996. Except on the income front, the average weekly wage in 1996 was about $486/week, or $25,272/year. A $924/month mortgage payment would have been $11,088/year in 1996, or 43.8% of average income. That is very comparable with today’s figure of average mortgage payments representing 42.5% of median income.

It is important to keep in mind that statistics reporting median metrics are just that: medians. If my math is correct, there are approximately 50% of working Americans making less than the median, and 50% making more than the median (that’s a little math humor for you). And things are, needless to say, considerably harder for those who make less.

And this is where the stress is most felt. For starters, saving 10-20% for a down payment is particularly challenging for those just getting started out. This is definitely an aspect of the current housing market that is significantly more burdensome than it was in 1983. Keep in mind the analysis above was mostly about cash flow and what portion of income goes towards a mortgage. But the barrier to entry is much more challenging today because home prices are so much higher, even when adjusted for inflation. The median home price in 1983 of $74,900 would be equal to $253,000 today. But the average median home price today is actually much more than that: $408,800. That means would-be homebuyers need to be able to bring more to the table today than they did in the early 1980s, even adjusted for inflation, and for many people, that is just an impossibility.

Consider, too, that income statistics are much more complicated than just reporting the median. That same BLS report referenced above showing today’s median weekly wage of $1,235/week is the number for all working Americans. For women, however, the median wage is $1,098/week. For Hispanic workers (male and female combined), it is $984/week. For Black men, it is $1,016/week, and for Black women, it is $956/week. If you were to do the full analysis above with a Black women’s median wage of $956/week, it represents an annual income of $49,712. The median monthly mortgage payment over a year of $27,324 would represent 55.0% of income. However, a caveat upon a caveat to consider is that female and minority wages were undoubtedly also lower than the overall median income in 1983, and probably even more so, so even though things are harder for those groups today, they were also harder back then.

It’s also worth taking a look at young people. The average median wage for young men and women age 16-24 is $812/week and $723/week, respectively. I’ll spare you the math, but the portion of a median home purchase at those income levels represents 65-70% of young people’s paychecks, which makes homeownership very difficult to say the least. (I know very few 16- and 17-year-olds are buying homes, but that’s the lowest age bracket of weekly wages the BLS reports; I’d rather see the numbers for those age 21-30, but that data doesn’t really exist in the same format. So it’s not exactly a fair statistic, but I still felt it was worth noting).

Final Thoughts

Barrier of entry concerns aside, that it was, perhaps, more challenging to pay a monthly mortgage in 1983 as compared to 2026 may feel disheartening to the modern generation, who generally feel like they have it pretty tough. One silver lining is that my previous 1983 vs. 2023 analysis, which I wrote in August 2023 and which you can read here, showed that average mortgage payments as a percentage of incomes were almost exactly the same in 2023 as they were in 1983. This means that things were harder for homebuyers just three short years ago than they are today. Things have gotten better! That should be a sign of hope for beleaguered buyers.

Things might get even better for buyers if interest rates continue to come down and if home prices continue to ease. The 2023 analysis showed challenges for buyers relative to today because the average interest rate in August 2023 and the one I used in that previous analysis was 7.2%, and the median home price was $416,100. Both of those numbers have moved to the good (6.3% and $408,800 today, as noted above), which has resulted in a more positive homebuying market. Incomes have also improved, albeit modestly, from 2023 to today.

Another reason to believe things are actually better today relative to 1983 is that, generally speaking, homes are nicer today. They are larger, more energy efficient, and typically have more amenities. This is part of the problem, some might fairly say, as not everyone wants a larger home with greater amenities. Countless buyers would much prefer a smaller home for $253,000 (the equivalent dollar amount today to the 1983 median home price), but that type of home simply doesn’t commonly exist on the market these days, particularly in higher-priced areas of the country. That is a policy problem as much as it is a financial one, as it is just too hard (and not profitable enough) for builders to construct starter homes that can be sold in the $200,000-$300,000 range. There are not enough homes being built to accommodate buyer demand in this price band, particularly from young people and others who have been historically underrepresented in the homebuying pool.

The other big consideration that is worth its own article at some point is to compare the carrying costs of home ownership today versus other time periods. I suspect property taxes and insurance have gone up considerably relative to inflation (especially insurance). However, there are likely some other areas of homeownership that cost less, like the cost of appliances and other fixtures, which have generally come down in price over time, adjusted for inflation. A final consideration is that the general “cost of life” is higher now, as there wasn’t anybody paying a monthly internet bill in 1983, for example, but today having internet (and having to pay for it) is essentially a requirement for life.

Lastly, another difficult thing to quantify is how tastes have changed over time. I would like to research this topic further, as it comes up from time to time from readers. Do homebuyers today have more demands, even if said demands are beyond what their budget should reasonably entail? It’s possible, although I still think the primary problem is a lack of inventory at all price points, and that buyers are generally pretty rational, even if expectations have crept up over time even if incomes and budgets, adjusted for inflation, have not.

To close, however, and to reiterate a point above, the real stress in the housing market is in the low and middle tiers of the spectrum. The main challenge is this barrier of entry issue, where home prices have risen in value so far beyond what the typical person who makes less than the median income can afford. To improve that reality for millions of Americans, home prices have to fall or incomes have to rise more substantially than they have over the course of time, and lower interest rates certainly wouldn’t hurt either, even if they are relatively low at the moment, historically speaking.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Greetings from Newburyport, Massachusetts, where our family is spending the tail end of school vacation week. The big highlight was a Saturday down-and-back to the Franklin Park Zoo.

I have drafts of several deeper-dive pieces in the works, but for today, I wanted to draw out some data I was working with this past week that I think shows just how sensitive the buyer pool is to the current economic winds, which in the case of the past 10-14 days, have been generally favorable to the homebuyer market. This may feel surprising with such gloom and anxiety out there in the headlines, but there have actually been some signs that the spring buying season may be salvaged after things were looking pretty dismal in the late winter and early spring.

We’ll see what happens over the next 30 days, though. At the very least, moves in the data over the past three weeks underscore just how sensitive people are to seemingly small moves, but ones that actually represent some pretty big levers in the economy. It’s always worth remembering that every piece of data represents real people making real-life decisions. It’s easy to get bogged down in the quantitative metrics of it all, but you can see how significant the human impact is when you consider the actions and behaviors taking place (or not taking place) as the numbers move. Consider the following:

• For all the inflationary pressures from the rising price of gas, interest rates have actually come down over the past two weeks. The average 30-year fixed rate mortgage hit its recent peak of 6.64% on March 27th, but has since settled at 6.32% to end this past week, per Mortgage News Daily. This key rate has been quite stable over the last week, fluctuating only slightly within a narrow range of 6.29%-6.33%. On a $400,000 mortgage, this seemingly small interest rate change represents a difference of about $80/month, or about $1,000/year, which is real money, especially to those just getting started out.

• In response to falling rates, after four straight weeks of declines in March, mortgage applications have increased each of the last three weeks: +1.8%, +7.9%, and about +10.0% (with data for the most recent week estimated, but still being finalized). The fact that mortgage applications have so closely correlated with interest rates (i.e. as rates went up in March, applications dropped significantly; as rates have fallen over the past three weeks, applications have gone back up), shows just how closely would-be buyers monitor rates, and how sensitive buyer behavior is to changes in rates.

• After some notable declines in January and February, pending home sales actually increased in the month of March, per data released this past week from the National Association of Realtors. This provides some momentum to the market as we enter the peak buying months of May through August. The home market was completely dismal in the first two months of the year, so the March number provides a little bit of optimism including to sellers looking for buyers, and for real estate agents and others in the real estate world looking to facilitate sales.

I think what has happened this winter and spring has almost been a mini-cycle within the cycle. Buyers froze up with spiking rates, yet inventory among sellers continued to increase as more homes got listed for sale. This resulted in an equilibrium shift in the market whereby a small glut of supply relative to demand combined with a pressure valve release on interest rates (i.e. the drop from 6.64% to 6.32%), plus just the normal seasonality of the housing market brought buyers back from the sidelines. It’s interesting to watch this dance between buyers and sellers, and fortunately for sellers, buyers seem to be reengaging after sitting out for a while.

It’s worth pondering why interest rates have come down. The inflationary pressure from rising gas prices has ripple effects through so many different areas of the economy, so you would think interest rates would be rising. The counter to this, however, is that in a risky economic world, there is often a flight to quality, and investors out there still see U.S. Treasury bonds as the safest and most secure investment around, so they have been pouring money into U.S. bonds in recent weeks. This has had a muting effect on key indicators like the U.S. 10-Year Treasury note, which has subsequently had a corresponding dampening effect on mortgage rates as banks and mortgage companies often price mortgages as a cushion above the 10-Year Treasury.

What Happens Next

What happens from here depends a lot on the status of a fragile ceasefire in Iran and the potential re-opening of the Strait of Hormuz.

People should be aware of that chart below, and of its far-reaching implications. The chart shows the daily number of ships passing through the Strait of Hormuz. The obvious drop-off at the outset of the Iran War is clear, with an average of 90-ish ships per day crossing through in normal times and often as many as 120 or more. The number of ships passing through dropped immediately when the war began, and has been mired in a daily average of 5-7 ships for the past eight weeks with sometimes barely any ships making it through what is now a double blockade of both Iranian and U.S. ships limiting traffic.

As we saw during COVID, when global supply chains are impacted so significantly, the availability of goods and therefore their prices are altered all over the world. No doubt we will be seeing similar impacts in the weeks to come, and indeed we already are. Gas prices are the obvious one that impacts virtually everyone, but the impacts carry into other areas, too. Fertilizer prices, for example, have skyrocketed 30-50% since the end of February; about one third of all fertilizer passes through the Strait of Hormuz annually. Prices have also risen on certain agricultural goods that pass through the Strait, including corn, soy, wheat, and dairy products.

I don’t have any greater conclusions this week other than noting that the whole butterfly-flapping-its-wings analogy is real, but at this moment in time, there is more than just a butterfly flapping its wings, but a full-on conflagration in the Middle East. These things are hard to predict, to say the least. But as we’ve seen just recently, even modest moves back in the direction of stability like an extended, albeit fragile, ceasefire, help move things in a more positive direction, as with the move to the good on interest rates just recently. We’ll see what the next week has in store, however.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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As we look ahead to the summer tourism season throughout the United States (and especially in particularly high-tourism areas like from where I write here in Maine), the variables at play represent a real microcosm of the larger economic forces we are dealing with right now. Bifurcated consumer confidence reflective of the K-shaped economy, consumer anxiety in the face of high costs including gas prices, political tension and international friction: it’s all there, and it could combine together for a fairly tepid tourism season.

Even if you are not directly involved in travel and hospitality yourself, the state of the tourism landscape impacts us all because of the multiplier effects, or lack thereof, based on how much spending, or not, there is in this space. The travel and tourism sector in the United States supports 15 million jobs annually and generates $3 trillion in spending.

So what’s in store for the season ahead? On paper, the travel industry still looks resilient. Key data aggregators like Deloitte and McKinsey report consumers are still spending and, somewhat surprisingly, younger generations are increasingly likely to see travel as a “non-negotiable” expense. Experiences carry a premium in the post-pandemic psyche, particularly to younger people (my own theory on this is that young people sense their lives have become overly algorithm-ized, and spending on travel is a way to break free from digital malaise).

But the composition of travel spending illustrates a more complicated story. Deloitte’s most recent travel outlook points to a clear bifurcation: higher-income households continue to anchor demand, filling planes and booking resorts. Meanwhile, middle- and lower-income consumers are behaving much more tactically, including shortening trips, choosing drive-to destinations, or selecting down to lower-priced options. A family that still travels, but spends 20% less once they arrive, has a very different economic impact on the local economy of that area than one that comes without feeling as bound by spending restrictions.

This is the K-shaped economy at play. Premium and “ultra-luxury” travel continue to be extremely strong, whereas there is pressure in the middle of the market. Mid-tier spending, vacation add-ons, and ancillary spending on restaurants, extra excursions, etc., are all setting up to be softer in 2026 than they were in 2025.

One area that could show stability as consumers select down from mid-tier price options to lower tiers is in budget hotels, campgrounds, and the like. If you combine the millennial sensibility that travel is non-negotiable with the mathematical challenge of traveling in a high-cost landscape, and you will get travelers self-selecting down a tier or two in terms of accommodations and experiences.

However, this is where a more recent headwind provides a potential wet blanket on the travel sector, and that is the high price of gas. I’ve written a lot about gas prices over the past few weeks, in part because it is one of the most important topics on everyone’s minds, so I won’t dwell on it too much here, other than to state the obvious: when the price at the pump is so high, people pull back on driving, especially on long trips. Plane travel is typically more expensive, too, as airlines pass along as much of the cost as they can to consumers without breaking the demand. The average price of a gallon of gas nationwide closed this past week around $4.06/gallon, up close to 40% since the start of the Iran War.

The International Component

A recent BBC report predicts that 2026 will be a record year for the global tourism market. Destinations are changing, however. Europe has long been the most popular travel destination, but less sought-after locations have been surging of late. Per the report:

The destinations recording the fastest growth were not the usual headliners. Brazil saw arrivals surge by 37%, Egypt by 20%, Ethiopia by 15% and Bhutan by 30%. Even the Seychelles, a tiny archipelago off East Africa, recorded a 13% increase.

“More travelers are now drawn to distinctive culture, landscapes and the possibilities of discovery, so countries with a strong identity and decent access are clear winners,” according to Steven Vigor, CEO of travel advisory firm Revigorate.

One place that is not seeing a surge of inbound tourism is the United States. According to the World Travel & Tourism Council, although global travel was up in 2025 and boosted economies throughout the world, the slowest-growing region in the world was North America, with the United States itself growing its travel and tourism market by just 0.9%. The number of visitors to the United States was down by 5.5% in 2025 as compared to 2024. The big winners in 2025? China and the rest of the Asia-Pacific market. Tourism was up 9.9% in China in 2025. Malaysia and the Philippines were also up by double digits, with India and Indonesia both up just over 7.0%.

It’s not just leisure travelers and vacationers who are skipping the United States either. Business travelers and worker visas are also down, declining steadily for the past year, per the National Travel & Tourism Office.

Why? It’s not that travel overall is falling; in fact, as the statistics earlier on point out, global travel is actually up. Per Business Insider, just looking at travel by Australians, for example, global travel is back to pre-pandemic levels:

Australians travelling to Canada rose 4% in the last year, 10% more visited India, and visits by Australians to China and Japan rose 20% and 21%, respectively, but 3.2% fewer booked a trip to the US.

So we have to address the question head-on of why fewer people are choosing to travel to the United States right now, and it comes down to negative views of American politics, resentment of economic policies like tariffs, and just a general sense of unease if not outright fear that some people have about traveling to the United States right now, especially those of different racial backgrounds who feel hostility when they look towards our country right now.

Overall, many people are simply choosing to boycott travel to the United States due to the general sense of hostility and resentment that is out there. Amid bitter trade disputes, the former Prime Minister of Canada, Justin Trudeau, called on Canadians to stay home this year rather than come to the States. Indeed, travel by Canadians by car into the United States is down by 35% over the past two years. There have been impacts here in Maine, for sure, with a general sense that the hotel, restaurant, and hospitality sector in general was softer last summer and likely will be again this summer.

For sure, there are other factors at play right now, too, including a stronger U.S. dollar and a more fragmented global environment. Even modest percentage declines in international visitors can translate into meaningful revenue losses because those travelers tend to stay longer and spend more per trip. That is why the season ahead may feel, in many places, like a season that is not quite flourishing.

There may be a glimmer of hope over the past week as gas prices did slightly ease down with news that the Strait of Hormuz may be opened back up, but it may also take some time for meaningful price declines to hit the pumps. The broader question of international perception towards the U.S. will undoubtedly take more time to reset.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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I’ve never wanted The Sunday Morning Post to be a current events newsletter. There are plenty of places you can go to get the economic facts of the week (actually, I’ll share links to some of the resources I use as an addendum at the end of this week’s article). I think I also went about two years in the early days of The Sunday Morning Post barely ever writing the names “Donald Trump” or “Joe Biden” because I didn’t want this to be a series of political articles, and quite honestly it gets exhausting to include the political overlay even though I know it’s often relevant. There are plenty of places you can go to find that type of analysis, though.

But nonetheless, current events have far-reaching impacts, as do the rantings, ravings, and ramblings of whoever is in the White House. Sometimes I think it would all be a lot more interesting if it wasn’t real life. It’s hard to write about interest rates and gas prices when it feels like the world is on fire. This is also the third time I’ve written about Iran lately (here and here), so I wouldn’t blame you for getting tired of the topic, although it really is the thing that touches on all other topics right now.

So we press on. Because actually, interest rates do impact people in significant ways, as does the price of gas, for that matter. I saw and heard anecdotal evidence from some of my business owner bank customers that March was a tough month. People just were not going out and spending money, no doubt burdened by high prices on all manner of goods and services and, in particular, the cost of filling up the tank. When people can’t afford the normal things of life, it doesn’t just have real-world implications — it’s actually the real world.

A Brief History on Oil Shocks

Things are structurally different today than they were in the 1970s, but it’s still worth a quick comparison. In 1973, there was a coordinated cutoff of oil supply by the OPEC nations, which resulted in dramatically higher prices. Prices quadrupled, in fact. A similar supply shock occurred in 1979. The jumps in oil prices sparked economic recessions here in the United States in both 1973-1975 and in the early 1980s. Both recessions were marked by steep increases in inflation and muted economic growth.

The 1970s was not the only period of disruption in the oil market. The price of oil peaked at $147/barrel in June 2008, for example. We all know what happened next: a massive financial crisis more significant than anything since the Great Depression. Oil prices also peaked because of the supply chain crisis during the pandemic. That rise, too, was part of a massive inflationary upswing.

If you look at the chart for the price of oil, you can see just how notable these upswings have been (data is only available from this source going back to 1986, so the oil shocks of the 1970s are not shown):

The rapid rise in oil prices over the past 45 days is clearly evident on the far right side of the chart. Almost every other time prices have spiked like that, it has preceded an economic recession, which are all the vertical grey areas of the chart.

Does that mean we are marching towards a recession? It depends on a lot of things, including how quickly, or not, things are resolved in Iran. Certain key data points are flashing red warning signs, though:

• The average price for a standard gallon of gas at the pump has increased from $2.93 on February 27th to $4.12, an increase of 41%.

• The average 30-year mortgage rate was 5.99% on February 27th, and closed this past week at 6.39%.

• The monthly CPI reading jumped from 2.4% in February to 3.3% in March, which is a pretty big move in the wrong direction, and creates some serious headwinds against further interest rate cuts in the months ahead by the Federal Reserve. Early readings on April inflation have it tracking towards 3.6%.

• Consumer sentiment has declined in both March and April. Per the University of Michigan report:

  Consumer sentiment sank about 11% this month, extending a decline that began with the start of the Iran conflict, and is currently about 9% below a year ago. Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall.

In fact, Friday’s consumer sentiment report recorded the lowest reading… ever. “Open-ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy,” said Joanne Hsu, the survey’s director, as part of the data release.

What Happens Next?

I’m not a Trump whisperer by any means, and needless to say it is hard to predict what he is going to do or say. But I know he must care about the political realities of the current moment. We are headed for crucial mid-term elections this fall, and Democrats are poised to make big gains regardless of what happens with the crisis in Iran. But the situation has made Republican prospects even bleaker, and for better or worse, the president’s future is tied to the Republican Party’s success or lack thereof in the upcoming election. If Democrats retake control of the House and the Senate, they will not only be able to effectively block the president’s agenda for the next two years, but they will probably be able to launch all manner of investigations into what Trump and others have been doing or not doing over the past two years.

So far this year, Democrats in special elections have been vastly outperforming expected results, and Democrats lead in a generic ballot against Republicans by 5.5%, per Nate Silver. Local issues and the candidates themselves matter, but Democrats are feeling optimistic, and Trump and his people have to be seeing this in the numbers themselves. The rules of political survival suggest that this alone may be enough motivation to find an off-ramp in Iran. In other words, the political realities of the Iran War and specifically its impact on gas prices and interest rates will force President Trump and his team to find an off-ramp. In fact, you could see the beginnings of this over the past week, with a two-week ceasefire being declared on Tuesday. The ceasefire is fragile at best, but you can already see the results in the data just since Tuesday:

• Per GasBuddy, prices have come down about 10 cents a gallon since Tuesday.

• Per Mortgage News Daily, the average 30-year mortgage rate eased down about 5 basis points (0.05%) this past week.

• The stock market surged this past week, recovering a portion of the recent losses.

• Even the Michigan Consumer Sentiment survey that showed all-time low feelings noted in its narrative, “Economic expectations will likely improve after consumers gain confidence that the supply disruptions stemming from the Iran conflict have ended and gas prices have moderated.”

The movement in the data over just the past few days shows just how significant market reactions can be to shifts in tone, rhetoric, and policies even if, as noted previously, the current ceasefire does feel a bit tenuous.

What Comes Next

Historically speaking, after a sharp rise in gas prices, one thing that often does happen is that they, well, drop back down. In July 2007, for example, the average price of a gallon of gas at the pump was about $4.12 (almost exactly what it is today). By December 2008, it was down to $1.61. Gas peaked at just over $5.00/gallon during the pandemic in June 2022, but in only six months’ time it had dropped to just over $3.00/gallon. Sometimes that price drop is due to a falling off of demand, which is a reflection of a poor economy that finds itself in recession, and that is problematic itself, and other times it is just a case of supply catching back up. But the point is, things do normalize after a while, which I suspect is what will happen here. As for the election, as James Carville said in 1992, "It’s the economy, stupid,” and you can bet whichever party Americans are feeling will better care for their wallets this November will carry the day (and the next two years).

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Addendum

Here are a few research tools I have in a folder on my Favorites bar. Just passing them along in case you want some things to follow.

Gas prices: GasBuddy and AAA have live trackers of gas prices around the country. GasBuddy updates in real-time all day long, while AAA updates its average each morning.

Interest rates: Mortgage News Daily is a site I frequently reference, and it has a good aggregation of mortgage rates from multiple sources. I also have a link to the U.S. 10-Year Treasury Live Rate and U.S. Treasury Daily Rates.

University of Michigan Consumer Sentiment Survey, referenced frequently in The Sunday Morning Post for a read on how people are feeling out there.

The Cleveland Fed has a Nowcast Inflation tracker, which updates the CPI statistic throughout the month and tracks pretty closely to what the official CPI Report will show, which is only released monthly.

Just this week, I started following two tracking sites for traffic through the Strait of Hormuz. Over the past few days, there have been 7-10 ships making it through. Usually, the average is 120-140 ships per day. You can find these trackers here and here.

Have a great week, everybody!

Nearly five years ago, I wrote an article entitled, “2021 is Different than 2027.” I was writing in response to concerns that the housing market was getting overheated. There is sometimes a “what goes up, must come down” mindset to things in the economy, and people were starting to get worried that the run-up in prices at the time would precipitate a corresponding drop, if not an outright crash. As I predicted in that August 2021 article, a housing crash did not happen, and, in fact, home prices have continued to rise.

But half a decade later, the housing market is different. The average 30-year fixed mortgage rate in August 2021 was about 2.9%. This was actually almost the exact all-time low. Today, the average rate is around 6.50%, down from its 2023-2024 highs, but up about a half a percentage point since the start of the Iran War five weeks ago.

The Chief Economist for the National Association of Realtors (NAR) said in February (even before the recent run-up in mortgage rates) that we were entering a “new housing crisis.” The 2008 housing crisis is still fresh in many people’s minds, so when someone credible throws around language like that, it’s worth a closer look. Are we headed for a housing crisis? Are we already in one? If yes, what does that mean? If not, what would a true crisis look like? Let’s dig in.

The Roots of the Perceived Crisis

I sometimes think of writing a book to try to explain the many layers and variables at play in the 2010-2025 housing market, but then again, who would read it? I can assure you that I’m not going to write a full book in the paragraphs below, otherwise who would make it to the end of this article? Low interest rates, an undersupply of new housing due to low rates of construction, sociological changes related to the pandemic, a changing economy: there is a lot to this story.

But here we are at the outset of Q2 of 2026. Let’s look at the stats today. In January, the number of existing homes sold was 4.02 million on a seasonally-adjusted, annualized basis. This was about a 6% drop-off from December and a tick down from the 4.08 million homes sold one year prior in 2025.

New home sales (as opposed to the statistic above, which is already-owned/existing homes) are also down this year. In January, the rate of new homes sold was 587,000, a sharp 17% drop from December, and about 13% below the rate one year prior in January 2025. The data for new home sales for February is now delayed (I’m guessing due to everything that is going on within the federal government); we won’t get fresh data on this statistic until May.

But put the existing and new home sales data together, and you get a housing market that has many fewer transactions happening today than it should in a normal, healthy market. In January 2020, which was the last comparable pre-pandemic (just barely) January, there were 5.46 million existing home sales and 764,000 new home sales for a total of about 6.224 million. January 2026’s combined total of 4.607 million, by comparison, is about 26% lower, which shows just how much the market for home sales has slowed.

Keep in mind, too, that the NAR crisis quote was given in early February, and conditions for homebuyers have only deteriorated since then with a recent rise in interest rates. The chart below shows weekly changes in mortgage applications via the Mortgage Bankers Association (courtesy of Trading Economics). Mortgage applications were up four weeks in a row in February, but have subsequently declined by 10.9%, 10.5%, and 10.4% over each of the past three weeks (the three downward yellow bars on the far right of the chart):

The State of the U.S. Homeowner

What the data above suggests, for sure, is that the number of home transactions is going to continue to be tepid if not drop in the weeks ahead. Fewer applicants for home loans in March means fewer transactions in April, May, and June. I can understand from the perspective of a realtor how this could, indeed, feel like a crisis. It is entirely a different question, however, as to whether the housing market is actually in crisis territory.

The big problem in the 2008 housing crisis was that financial peril among U.S. homeowners triggered not only their own serious financial issues, but also systemic stress. Massive banking losses, which threatened to (and, indeed, did in many ways) rip through the economy with contagion speed led to an outright financial collapse second only to the Great Depression in magnitude in recent history. When people’s variable interest rates increased and their property values declined, many homeowners suddenly found themselves upside down on mortgages they could not afford. Defaults spread through complex collateralized debt securities, and, essentially, all hell broke loose.

Today, however, the situation is much different. True, turn on the TV or scroll your phone and there are a million reasons to be fearful in the current economy and with the state of the world right now, but any sort of systematic problems or perils in the housing market are just not showing up in the data, at least not yet.

Delinquency rates

Existing U.S. homeowners are remarkably stable, at least as far as their homes are concerned (lots of people are struggling in other areas with rising costs, particularly with gas prices in recent weeks). The delinquency rate on single-family home mortgages in Q4 of 2025 was 1.78%, a historically healthy number, and essentially where it has been for the past three years. Delinquency rates peaked recently at 2.83% in Q3 of 2020 (the heart of the pandemic), but even that was nothing compared to the 10%+ delinquency rates we saw from the end of 2009 to the middle part of 2012. I didn’t work in banking at the time, and I’m glad I didn’t. If you were to extrapolate a 10% delinquency rate onto any bank’s current loan portfolio, needless to say it would be pretty devastating after operating in the 1.0-2.0% range for the past several years.

This data shows that homeowners are generally able to keep up with their payments. However, there are also some causes for concern deep in the data. Delinquency rates are higher, for example, for less well-qualified borrowers. This is to be expected, but the numbers are fairly stark. For Non-QM/Non-Prime 2.0 loans, which is a jargony way of saying mortgages to borrowers who may not typically fit a bank’s traditional underwriting model including those who are self-employed, high-net worth borrowers with irregular cash flow, or those with irregular credit issues like a recent divorce, the 30-day delinquency rate is all the way up to 7.26%, per Fitch Ratings. That is pretty high. Delinquency rates are also higher on mortgages booked from 2023-2025, which were generally done at higher price points and with higher interest rates. There is an important story here about the K-shaped economy, and how much harder the housing market is for people who have just been getting into it as compared to those who have been there for awhile.

One reason why American homeowners are, generally speaking, not in any type of peril comparable to 2008 is that homeowners today have stronger equity in their homes, again, generally speaking. Only about 3% of homeowners are seriously underwater (i.e. they owe more than their houses are worth), per the researchers at ATTOM. By comparison, 44.6% of homeowners are what ATTOM calls “equity-rich,” which means their loan balances are half or less than half of their estimated home market values. Home prices would have to drop pretty substantially for most homeowners to be upside down, and, indeed, about 40% of all homes are paid off, which makes those homeowners particularly stable, needless to say. It’s harder to have contagion peril spread through the banking system as mortgages blow up when 40% of homeowners don’t even have a mortgage to begin with. In 2008, on the other hand, 68.4% of homeowners had a mortgage, oftentimes with variable rates which were moving in the wrong direction on them.

Is There an Actual Crisis?

I do not think the sentiment behind the “new housing crisis” quote is accurate. I wrote five years ago that 2021 was not 2007, and neither is 2026. But that doesn’t mean there aren’t some major issues out there that represent some real risks to the broader U.S. economy as a result of what is happening in the housing market.

The portion of GDP that is attributable to the core housing market (e.g. new home construction, renovations, brokers’ commissions, etc.) is about 4%. But the impact to GDP gets bigger when you factor in banking, furniture, utilities, and housing-related services; it’s in the 15-18% range. When things slow down in an area of the economy that touches nearly 20% of things, it’s going to be felt more broadly.

The threat to the economy in the current housing market is not a massive drop in prices and the contagion effect of busting mortgages, but rather that a damp blanket is put over everything as housing slows down. When fewer transactions take place, there is less money flowing and multiplying through the economy. And that is probably what the National Association of Realtors is reacting to, and why their Chief Economist is warning of a crisis. Again, I think crisis is probably a hyperbolic term to use at the current time and the NAR certainly has a vested interest on behalf of its members of juicing the wheels of things, but it’s also fair to wonder how the economy is going to look if the sluggish housing market doesn’t pick back up.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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In Memoriam

Sadly, a regular reader and subscriber to The Sunday Morning Post, Andy Molloy, passed away last week after a battle with cancer. Regrettably, I only got to know Andy in recent years. I wish I had met him sooner. We would get together every few months for breakfast or lunch at the A1 Diner in Gardiner, Maine and he’d tell me everything that was going on in the Maine media scene, state government, and more. He would pick my brain about banking, and wanted to know what every community bank in Maine was up to. I will miss our conversations greatly, and always appreciated how much he supported me and my own experiment here in journalism. Rest in peace and thank you, Andy Molloy. Read more about Andy here and here.

From 2006-2010, I lived within a stone’s throw of Fenway Park, first off of Beacon Street just a short walk across a large parking lot to Yawkey Way (since reverted to its original name of Jersey Street), and then down the road in Brookline for two years. I worked for the Boston Red Sox for those years, and my job, my apartment, my grocery store, my gym, and my other favorite spots were all within about a half-mile radius of one another. I counted once in the summer of 2006 that I worked at Fenway Park 42 days in a row, which was not a bad way to spend a summer at all. It’s hard to say this to people who think of working for the Red Sox as a dream job (it was!), but eventually you do get the challenges and frustrations of any job the way you would working that much, and once the 2006 regular season ended (unceremoniously, that particular year), I forced myself to start at least taking Sundays off. I did love working for the Red Sox, but I always knew I wanted to move back to Maine, which is what came to pass, so my Red Sox career ended in 2010.

Now back in Bangor, Maine, I might make it to Fenway Park once a year, give or take. The truth is, I barely recognize the area that surrounds the ballpark. I’m sure the apartment I paid $800/month for in 2006 on Aberdeen Street across that big parking lot is three to four times more today. Most, if not all, of my favorite spots from those few years are gone: Boston Billiards, Baseball Tavern, Il’s Deli, Boston Beerworks, the Chicken Bone — none of them exist today.

I don’t mean to claim there was some massive gentrification process around Fenway Park only after I left. Gentrification is a loaded word, most relevant in the context of people getting priced out of their homes in longtime neighborhoods due to economic development and the general evolution of things. Losing my gym that happened to be right on the other side of the Green Monster is cause for nostalgic pause, but it’s not lifechanging. Even when I was living there, the area from Kenmore Square to the Longwood Medical Area had already been pretty well-gentrified as compared to its earlier grittier days before my time.

By the way, one of today’s primary topics is about the real estate around professional sports venues, but the advancement of the Longwood Medical Area, which includes Harvard Medical School, Dana-Farber, Brigham and Women’s, Boston Children’s Hospital, Beth Israel, and others, is just as much a reason for the massive development in this area over the past two decades as anything — it’s one of the largest concentrations of top tier medical institutions in the country if not the world.

But regarding the topic at hand today, real estate development is big business. So, too, are professional sports. And increasingly, the two are intertwined. Real estate development is being done by sports franchises themselves (or at least their ownership groups), who recognize that their own investments in professional sports team can amplify the value of all of the surrounding real estate, so why not own that real estate themselves?

Professional Sports as an Investment

Few people will ever be in the echelon of investors who can afford to acquire a professional sports team or to be a part of an ownership group that does so. In 2002, the Boston Red Sox were purchased for roughly $380 million. Today, people who track these sorts of things estimate the value of the franchise at nearly $5 billion, which puts them third in Major League Baseball behind only the Yankees and the Dodgers in terms of value. I’m biased, but in my opinion these are clearly the three most beloved brands in Major League Baseball (you might also throw in the Chicago Cubs), so it’s no surprise they are the most valuable. But even the Tier 2 teams are now generally all worth over $1 billion. The Baltimore Orioles, for example, were the most recent MLB team to be sold. The value? Nearly $2 billion.

In the NFL, valuations are even higher. The Denver Broncos sold for nearly $5.0 billion in 2022, and the Washington Commanders sold for just over $6.0 billion one year later. The Dallas Cowboys, a team that is often cited as the most valuable franchise in all of sports, is purportedly worth approximately $13 billion. Even a less iconic team (despite winning this past year’s Super Bowl) like the Seattle Seahawks will likely sell for $7.0-$10 billion. In fact, the Seahawks are actively for sale right now.

I know $10-$13 billion for a sports team might seem obscene to some people, but you have to remember these are actually businesses. A $13 billion valuation would put the Dallas Cowboys roughly equivalent to the Hasbro company. The DocuSign company, for example, is worth about $9 billion, as is Zillow. Which would you rather own? The Seattle Seahawks? Or DocuSign. I’d take the Super Bowl champs.

The main reason why professional sports teams sell for so much is that, simply put, Americans have a deep and abiding love for professional sports, and these teams generate a ton of revenue. The Cowboys comfortably gross nearly $2.0 billion per year. In an attention-driven economy where our focuses are split in so many different directions, sports still draw people (and their dollars in).

There is, of course, the prestige factor. Who wouldn’t want to be an owner of a professional sports team? The number of opportunities is scarce (30 MLB teams, 32 NFL teams, and about the same in the NBA and NHL), so when a team does become available, the pool of qualified and interested buyers becomes more like a feeding frenzy. Even in the comparatively upstart WNBA, news broke just this past week about the owner of the Houston Rockets NBA team, Tilman Fertitta, purportedly trying to acquire the Connecticut Sun team for $300 million. He would then move the Sun to Houston.

In any of these leagues, if you want to own a franchise, you can’t just start one up; you have to acquire one from an existing owner (or be approved through a complicated, lengthy, and expensive league expansion process). But once you are in, you get to participate in media rights profits. Because we love sports so much and because of the unique nature of sports as live action activities (i.e. you basically have to watch it in real time), the media rights, which are shared between the leagues and their owners, are incredibly valuable.

Each team in the NFL, for example, receives a roughly equal share of the league’s national media rights revenue. People who watch professional sports are incredibly valuable to advertisers because they are often in key demographics and they are willing to actually sit down and watch a screen for 3-4 hours without interruption. They will then watch highlights later, sometimes over and over again through multiple screens (i.e. TV, phone, computer, etc.). Advertisers will pay big bucks to reach these audiences.

Just look at football, for example. The current set of television and streaming contracts covering CBS, FOX, NBC, ESPN/ABC, and Amazon totals about $110 billion for the NFL over 11 years, or roughly $10 billion per year for the league as a whole. When divided among 32 teams, that works out to approximately $310–$320 million per team annually from national media rights alone. And this is just the national media share; teams also earn additional income from local TV contracts, not to mention ticket sales, sponsorships, merchandise, and stadium revenue, which pushes total annual revenue for most franchises well above $500 million.

The Real Estate Angle

Factor in media revenue, other sources of team-related income, and the prestige factor of owning a team (plus, I would imagine/hope for most team owners, the fun of it all!), and you get a very rewarding and profitable enterprise. But there is another way professional sports franchises (or their ownership groups, at least) are maximizing their returns on investments, and that’s through real estate — specifically, owning and developing as much of the real estate around their stadiums, arenas, and facilities as they can.

Consider the Atlanta Braves, for example. In 2017, they moved into Truist Park, but the stadium was only part of the vision. Surrounding the ballpark is The Battery Atlanta, a mixed-use development of restaurants, offices, apartments, and retail that operates year-round, not just on game days. Who is the owner of The Battery? Atlanta Braves Holdings, Inc. Essentially, the Braves don’t just sell tickets anymore; they participate in rents, leases, and an entire ecosystem of economic activity at The Battery, making them one of the largest real estate developers in Cobb County, Georgia and a vertically integrated conglomerate.

NFL teams are doing the same. The Los Angeles Rams took the concept to another level with Hollywood Park, the sprawling development surrounding their recently constructed SoFi Stadium. Far beyond simply a sports venue and stadium, it’s a master-planned mini-city with residential units, office space, entertainment venues, and public parks. The stadium may be the centerpiece, but it’s one of countless revenue streams within the development. The New England Patriots have done the same, massively developing the area in Foxborough around Gillette Stadium into Patriot Place. Rather than partner with a developer on this project, the whole thing is owned by the Kraft Group, which also owns the team.

One advantage many of these teams have had, particularly the Patriots, is in building their stadiums and adjacent developments in less dense areas. The Patriots are not in Boston or Hartford, for example; they are in Foxborough, population 18,400. It is common now when a new stadium is built that it is done out in the suburbs somewhere, and the reason is that ownership groups do not want to be constrained in their real estate development opportunities. The Chicago Bears would like to launch a massive mixed-used development along the lines of what the Braves, Rams, and Patriots, have done, and so are looking to Arlington Heights, an easier area to build in 25 miles out of Chicago than where they are now (there are also rumors they could be lured across state lines to Indiana; no word on whether they would become “The Indiana Bears,” a moniker enough to make even the most casual Bears fan sick).

But long-time franchises in iconic locations have been figuring out this real estate thing, too. Take the Red Sox, for example. Part of the joy of being a Red Sox fan is Fenway Park itself. The oldest ballpark in Major League Baseball, Fenway is one of the top tourist attractions in Boston (and, indeed, all of New England), and many people will go to games just as much for the ballpark as the team itself. Years ago, there were rumors the Red Sox might try to move from the historic site, motivated largely by wanting to have a new stadium with development opportunities around it (plus increased modern, premium/luxury seating, which is also a big revenue driver for a team). The fans revolted. Instead, the current ownership group, which bought the team in 2023, has invested heavily in the ballpark itself to keep its historic charm, while modernizing many of its amenities (and revenue lines).

The Red Sox (through Fenway Sports Group) have also invested heavily in the periphery around the stadium by acquiring and redeveloping numerous properties. They have also reimagined the former Yawkey Way and Lansdowne Street as more pedestrian-friendly, year-round destinations. Fenway Park was built in 1912, but over 110 years later, it’s part of a broader, modern commercial strategy.

Lessons for the Rest of Us

The large numbers associated with professional sports ownership economics can boggle the mind. 99.99% of us will never be in that echelon. If the Red Sox do eventually sell for $5+ billion, if you could somehow negotiate a 1% stake as part of a broader ownership group, you’d still need to pony up $50 million.

But there are lessons here for anyone doing real estate development in their own way. Location matters, first and foremost. I mentioned above about all the development in the Longwood Medical Area of Boston with hospitals, laboratories, and scientific research centers. Residential rental and retail properties alike within several miles of a hospital setting like that, for example, will never lack for tenants. And vice versa, if you are investing in a rural area of the country, for example, where the hospital is experiencing intense financial stress and at risk of closure or at least a significant reduction in capacity, your real estate is at real risk of losing value if that hospital were to actually go down because many of the would-be tenants for the rental properties and other commercial spaces don’t necessarily stick around once the hospital closes.

But the opposite is true, too. Many successful real estate developers have made a career out of investing in properties, including land, in areas that are ripe for development. Location matters, but also in the greater context of what complementary development might take root in the future. Maybe if you get lucky, you’ll own some land in a suburb that catches the eyes of a team owner looking to build the next sports, retail, and entertainment campus.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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I was deep in the data this week, and while I was there, I happened upon three different data points that, when taken together, could foreshadow some real downward pressure on home prices. This would provide welcome relief to beleaguered buyers who feel priced out of the market after the significant rise in prices from 2020-2024, while offering some dose of caution for would-be sellers. If you’re thinking about selling, is this the time? Perhaps, if you believe what the data may portend. Let’s dig in:

New Home Sales

We’ll start by looking back to January. The start of the year is typically a slow time in the homebuying and home construction seasons, but this January was even weaker than normal. On Thursday of this week, the U.S. Census Bureau released its report on new single-family home sales in the month of January (note: new homes means just that, newly constructed homes. There is a separate dataset for existing home sales. Both are worth monitoring).

The number of new homes sold in January was 587,000 on a seasonally adjusted annualized basis (note: seasonally adjusted and annualized means they are adjusting the numbers to account for the typical seasonal changes, and the 587,000 number is more of a “pace” for the year and not the raw number of actual transactions; these adjustments are meant to allow for the comparison of the state of the home market between say, January and July).

The January new homes number was low — really low. In December, new home sales on a seasonally adjusted basis were 712,000, so the January number of 587,000 was a drop of 17.6% month-over-month. You might expect to see the number decline due to normal seasonality, but not when both numbers are already adjusted for typical seasonal changes. The number of new home sales one year ago in January 2025 was 662,000, so the January 2026 number was also lower than that to the tune of about a 15.6% decline.

New home sales have not declined because there are fewer new homes available, either. In fact, according to this same Census report, the number of new homes for sale in January was up, albeit modestly, 0.4% from December to January. It was also up 4.0% from January 2025 to January 2026. In other words, there are more new homes for sale, but significantly fewer sales.

The sales data for existing homes for sale has been similar in recent months to the data for new home sales. Per the National Association of Realtors, the number of existing home sales on a seasonally adjusted annualized basis in January was 4.27 million. But in January? The number was down to 4.02 million, a drop of 5.9%. A preliminary report for February shows a modest bounce back to 4.09 million existing home sales (again, seasonally adjusted and annualized), but those numbers are still pretty low.

Mortgage Applications

The drop off in home sales is reflected in another data point, as well, this one from the Mortgage Bankers Association (MBA). Per this week’s MBA report via Trading Economics, home loan applications are down:

US mortgage applications dropped 10.9% in the week ending March 13, 2026, marking the sharpest decline since September 2025, as borrowing costs climbed to their highest level since late last year and dampened refinancing activity. The average rate on 30-year fixed mortgages with conforming loan balances up to $832,750 rose by 11 basis points to 6.30%. Rising Treasury yields, partly driven by elevated oil prices and inflation risks linked to the Middle East conflict, pushed mortgage rates higher across the board.

It should be said that one caveat to the bear case here is that the 10.9% decline represents refinance applications and new purchase applications. Refinance applications were particularly dismal in the early part of March, which is largely a reflection of interest rates; when interest rates rise, it makes less sense to refinance. Purchase applications were essentially flat, which is not ideal for a thriving housing market, but it’s not as dismal as the 10.9% drop-off may sound, which, again, was largely driven by a notable drop-off in refinance applications to banks and mortgage brokers. Still, though, as we enter the spring buying season, you would expect purchase applications to be rising. The fact that they are not suggests the spring buying season could be a bit more muted than usual.

Interest Rates

Lastly, as noted in the MBA report above, interest rates continue to be a dampener on home activity. The average 30-year fixed rate per Mortgage News Daily started the month of March at 5.99%. It closed the week on Friday at 6.53%, which is a pretty sharp jump in just three weeks. The recent rise is evident in the chart below, which shows rates over the past year (the blue line is the Mortgage News Daily dataset, which is based on their own surveys, and the orange line is Freddie Mac data; the two sources have slightly different methodologies, but the data correlates quite closely):

I wrote last week in the context of the Iran War about why interest rates are rising, so I won’t dwell too much further on that today, other than to say in the past week nothing has really improved. A swift and/or decisive end to the war seems unlikely. That is why interest rates have continued to rise. Due to inflationary pressures, markets are now betting there is about an even chance that the Fed will actually hike interest rates as compared to cutting them this year, per Reuters.

What It All Means

Admittedly, I’ve written about the likelihood of price drops in the home market over the course of the last few years several times, and there hasn’t been a sharp drop-off yet (although I’ve never predicted a crash, but more of a deceleration and an easing down). It has taken longer than I thought it might, but I believe the easing has begun. In fact, that same Census report on the new home sales referenced above makes note that the median sales price of new homes sold in January was down 4.5% from December, and down 6.9% year-over-year from January 2025. The existing home sales data shows a similar, although slightly more muted, easing down in prices. This may not be the case in every market as local conditions matter a lot in the price and demand for homes, but prices are certainly not rising the way they did from 2020-2024. The median home price in January 2025 was $429,600 and the median price in January 2026 was $400,500, which is not an insubstantial change to the good for buyers.

Prices rose significantly from 2020-2024 as a basic symptom of roaring demand and limited supply. But what has happened in the past two years? Supply has stabilized due to increased inventory from the construction of new homes and the listing of existing homes for sale, and demand has notably declined. Now that supply is higher and demand is lower, it should result in lower prices (a basic principle of Econ 101). Practically speaking, that will come through things like price concessions from sellers who need to get their homes sold and incentives and discounts from builders to attract buyers for newly constructed homes. I think we can expect price declines of 10-15% throughout 2026. Again, this may not be the case in every market, but based on nationwide averages, I think prices will continue to ease down.

If you are thinking about selling, and provided you have plans on where to go, this is probably a good time to make the move. Inventory may continue to increase and as long as rates stay elevated, buyers are likely to stay on the sidelines. Increased competition from other sellers as homes get listed and stay on the market for longer could lead to further price reductions.

What Will Get Buyers Off the Sidelines

Two and a half years ago, I published an article entitled Homebuyers are Giving Up, in which I wrote:

Home ownership is a fundamental tenet of the American Dream. It not only provides stability in where one lives, but it also helps to build equity and wealth, wealth that is often shared and passed on between generations. If ladders to this aspect of the American Dream are not available to younger Americans today and those looking to purchase their first home in general, it raises the fundamental question about whether the dream is even attainable. For the next year or so, the situation for would-be homebuyers is not likely to improve, which has many simply giving up while they wait things out.

Some time has passed since that August 2023 article, and would-be buyers are still on the sidelines. This is even as buying conditions have improved, with interest rates down from their 2023 highs (despite the move higher in the past three weeks). Wages have outpaced inflation, on average, over the past two years, too, so in theory buyers should be feeling more financially secure.

It is my belief that buyers are on the sidelines not because of the acute conditions of the housing market, but because of their own sense of financial insecurity. People are hunkering down. The general sense that AI could spell doom for countless jobs and industries, lingering financial stress due to rising prices and lagging inflation, and overarching uncertainty with the state of our politics and now the Iran War: it has people pulling back on spending, including both discretionary things like eating out and travel, but on big life purchases like a home.

I do not think we are due for a major housing collapse a la 2008, however. The underlying conditions in the economy and specifically with regard to homeowner health are comparatively stronger than 2008. Delinquency rates on home loans continue to be very low and homeowners generally have a lot of value in their homes relative to what they owe, which is a major difference from 2008 (although that could change if home prices do drop in a significant way).

This latter topic of homeowner health is probably a topic worth of its own separate article at some point, in part because it does speak to the K-shaped economy phenomenon — it’s very hard for people getting started out to get into the home market, but those who are already there are generally pretty secure and stable.

Ultimately buyers will come back to the market once interest rates stabilize and, ideally, drop. And further, once they start to feel more economically secure. If prices for new and existing homes-for-sale come down, which I expect they will in the year ahead, it will also lure buyers back into the market, and we will go through another cycle of adjustments to supply, demand, and prices as things evolve.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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As the old saying goes, a butterfly that flaps its wings in Brazil can cause a tornado in Texas. As millions of Americans (and people around the world) have experienced when pumping gas over the past two weeks, the Butterfly Effect is real in today’s global economy, although the catalyst for the updraft in gas prices has been more than just a butterfly flapping its wings, but the sudden and intense bombardment of Iran by joint U.S. and Israeli forces starting on February 28th. Whether you call it a war or an excursion, as President Trump has labeled it, the aerial attacks have launched a conflagration with uncertain aims and questionable odds for quick resolution.

Gas prices are a particularly visible quantitative metric of the impact of these events, and that impact has been suddenly and intensely experienced by people and businesses around the world. About 20% of the world’s crude passes through the Strait of Hormuz, which has long been one of the world’s most important 100-mile stretches of water (about 24 miles across at its widest point), and only the more so today.

According to AAA, the average price at the pump closed this past week at $3.63/gallon, up about 23% since before the war/excursion began. Morgan Stanley has estimated that just a 10% rise in oil prices results in a jump in the Consumer Price Index (CPI) of 35 basis points (for all intents and purposes, 0.35%). For a CPI index that has been slowly and stubbornly inching its way back down to the goal-level of 2.0%, a potential boomerang up 0.35% or more would be a frustrating move in the wrong direction.

It may seem trite to talk about interest rates as bombs are flying and, sadly, as American service members are now coming home in caskets (with at least 140 injured so far), but the events unfolding now in Iran really do have a significant impact on life here at home, so they are worth addressing.

The price Americans pay for gas is, as mentioned, one of the more visible metrics. But it is the ripple effects of high oil and gas prices that really impact things. When Americans are paying more at the pump, they have less money to spend elsewhere. For better or worse, we are a consumer-driven economy, and when people don’t go out to eat or shop or travel, the multiplier effect from spending is much more muted.

As a quick aside, I was never able to pull all the data together, but a project I wanted to do at one point was to compare attendance at my state’s local high school basketball tournament each February with gas prices. Maine is a rural state, and people need to travel pretty far to make it to one of three centrally located tournament sites in Bangor, Augusta, or Portland. I spoke with the G.M. at one of these sites years ago, and he told me when gas prices are high, they see less attendance. People are sensitive to the price of gas. That means fewer ticket sales at the venues, but less spending in the area restaurants, hotels, and shops. For many years, it was thought that the high school basketball tournament week was the best week for car sales in the Bangor area of the entire year. I’m not sure if that’s still true, but you get the point.

Businesses, too, are sensitive to energy prices, of course. Oil itself is a production cost in virtually every tangible product. Plus, think of every business that has a travel component, and not just tourism related entities, but companies that ship lots of products or make deliveries or have to move one thing from one spot to another. If your input costs are higher due to the higher cost of oil and gas, you are either going to be less profitable or you have to pass that cost along to the consumer, which results in rising prices.

And, that, ultimately, is one of the big concerns about the Iran War, which is that it is going to lead to higher prices here at home. If prices are higher, it will give the Federal Reserve pause on lowering interest rates further along the same trajectory they have been doing for the past 18 months.

The Federal Reserve meets this coming week. A few months ago, there was roughly a 50-50 chance that interest rates would be dropped by a quarter point at this exact March meeting. Today? The odds are greater than 99% that rates will not be decreased, and the odds aren’t looking that good for the next several meetings either for those looking for rates to come down. According to prediction markets, the most likely odds are now for only a single rate cut in 2027, and there may not be any.

Mortgage Rates in the Last Two Weeks

Markets have reacted sharply to what is happening in Iran. The stock market is down about 3.5% since February 28th. Oil has spiked, as noted above. You can see what has happened to home mortgage rates over the past two weeks in the chart below, which have jumped too:

Things had been going in generally an advantageous direction for would-be homebuyers or those looking to refinance; the nationwide 30-year fixed rate dropped to just a hair below 6.00% at the end of February, which was the lowest rate in over three years. But the average rate closed this past week at 6.41% according to Mortgage News Daily, which is a pretty significant jump in such a short period of time. Mortgage rates are now back to being the highest they have been since the end of last summer.

This jump in rates is bad news for buyers, but equally bad for homebuilders. A homebuilder stock index I track for insights on the general mood and outlook in the industry is down 17% in the past month, which is sizeable. Homebuilders (and those who invest in them) are feeling quite pessimistic about a potential rise in rates, as it will likely mean less construction and fewer sales:

A Possible Counternarrative

The quantitative reactions in the market to what is happening in Iran are decidedly negative. There may be one positive alternative outcome at least as far as interest rates are concerned, however. In a turbulent investment environment, there tends to be a flight to safety. For all that is happening here in the United States politically, U.S. Treasury notes are still considered to be one of the safest investments in the world. You can own 10-year U.S Treasury Note that will yield 4.28% annually right now, which in an unstable environment is very attractive to many people. The yield had been 3.94% just prior to the first attacks, which shows that the Treasury market, too, has jumped along with oil and mortgage rates. However, the longer the Iran situation lasts and the more fearful investors become, the greater the demand will be for U.S. Treasuries, and the buying up of said notes could actually bring those yields down.

There is a pretty complicated dynamic in which banks and mortgage companies tend to price their home loan rates around things like the U.S. 10-year Treasury rate. If that yield does come down, so too should mortgage rates. So in a backwards sort of way, there has been this jump in Treasury yields in the immediate aftermath of the initial attacks, but yields could ease lower in the weeks and months ahead as investor dollars pile into this safe asset, which could then have a direct relationship with home mortgage rates also coming down. At the moment, however, the immediate catalysts for rising rates (mostly due to inflationary pressures related to oil and gas) are outweighing the flight-to-safety counter-possibility.

So What’s a Person To Do?

I’ve offered some seemingly conflicting thoughts on the trajectory of future rates, and the truth of the matter is, no one knows exactly where things are going. Treasury yield rates and the rates set by the Federal Reserve often correlate with one another, but are, in fact, different things. The former is based on more supply and demand, while the latter is based on inflation, the unemployment rate, and the moods and insights of the Federal Reserve board of governors. It is highly possible that the Fed will keep rates high to fight inflation, while U.S. Treasury yields may simultaneously come down in a flight to safety by investors.

What should you do as an investor in the face of all of this? The correct answer is almost always to stay the course. But people need to be sure the risk level of their portfolios matches their own risk tolerance and objectives. We are bound to have some volatility in all types of markets — stock, oil, interest rates, Treasuries — in the weeks ahead. Investors should be mindful of this and hold the line accordingly, or adjust to a risk tolerance that matches their goals.

From my perspective, we are in for an up-and-down stock market for the next few months, with an inflation rate that inches higher from its current level of 2.4% to something closer to 2.7-3.0%, which, unfortunately, may limit the opportunity for rate declines in the borrowing sphere. That said, if the Iran War can reach a swift conclusion, there may be a snapback effect of oil and gas prices dropping significantly, which would ease these new inflationary pressures we have been experiencing over the past two weeks. Time will tell.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Greetings from Boston, where I have been spending the weekend with my 12- and 7-year old sons. We went to the Celtics game Friday night to cheer on the Celtics plus Maine’s own Cooper Flagg, and then we spent Saturday at the Museum of Science and riding the T around town.

I’ve been planning some more comprehensive “AI in Banking” articles, but I haven’t had the bandwidth to fully think on them yet. So please consider this week’s article an appetizer of sorts.

Six to twelve months ago, when I would write about an anecdotal example of AI disruption hitting the workforce in these articles, I would call it a “canary in the coal mine.” Today, the analogy that comes to mind is that of the first waves of a tsunami reaching the mainland. Here we are, living our lives on the shore in blissful harmony with one another (stick with me, it’s just a metaphor), when meanwhile, hundreds of miles out to sea there has been a tectonic shift or a volcanic eruption deep underground, the energy waves of which are just starting to hit the beach.

That’s what it felt like this past week reading a slew of stories about AI implementation in banks and other financial firms around the country.

I wrote last week about how we are in a “low-hire, low-fire” job market, and I think that will remain true for a while. Businesses are not laying people off en masse because talent retention (yes, human talent) remains critical to operations, and, further, many workplace leaders just don’t know how to implement AI yet. CEOs, boards of directors, and other leaders know there are efficiencies and cost savings to be had; it’s just this super tangled mess of how and when to cross the Rubicon. There are complicated questions about the human impact of AI-related job cuts, but perhaps just as relevantly, much of the new technology is just hard to implement upon the actual technological frameworks and infrastructure that exist now.

We as a society are better at incremental changes rather than fast, monumental shifts. And yet, I keep thinking of that tidal wave metaphor. Here were some of the early ripples from just recently:

Jack Dorsey, founder and former CEO of Twitter, announced on February 26th that his new company, Block, which is the company that operates Square and Cash App, among other brands, would cut approximately 40% of its workforce. Rather than shy away from the technological impetus or try to hide it or cloud things over for the sake of P.R., Dorsey said, yes, AI would be doing more of the work that humans once handled, saying, “A significantly smaller team, using the tools we’re building, can do more and do it better. And intelligence tool capabilities are compounding faster every week.” Dorsey also said the company preferred to make one large, difficult cut now rather than a series of smaller cuts over the course of time, which would be more damaging to morale. Block shares soared 24% on the news, with investors cheering the move.

A more traditional financial titan also announced job cuts this past week: Morgan Stanley, which is reportedly cutting 3% of its workforce. While not explicitly referencing AI in the announcement, it is notable that the company is not particularly distressed or in any sort of financial peril. In fact, Morgan Stanley is coming off of a record year across its many divisions, with profits being up 50% in its investment banking space. And yet, still it is making notable cuts in personnel.

And yet, the Block and Morgan Stanley examples aside, there was a counternarrative out there this past week, too. Economists at the European Central Bank noted in a blog post that companies heavily investing in AI are, at least for the moment, often hiring more workers, not fewer. New tools require engineers, data specialists, compliance teams, implementation consultants, and all manner of support staff. In the early stages of technological revolutions, the pattern is often expansion rather than contraction, so note the economists at the ECB, so there is a gleam of hope in the financial services industry that it may not be all cuts and, in fact, there may be new jobs created.

For now, many banks and others in the financial services sector are still experimenting. They are testing AI copilots in research departments, for example, and trying out automated customer service responders. Some employees may be using (authorized by their employers, or not) learning models to review materials and to provide recommendations. For now, much of this is either in pilot phases or anecdotal one-offs by employees or departments that are particularly keen to implement AI tools.

It would be easy to close the tsunami metaphor by pointing out that after the early ripples comes the crushing crash of it all. And maybe that is what will happen here. For now, though, it feels a little bit more like a whirlpool. There are scattered (though often significant) layoffs, some contradictions in the data, and anecdotal experimentations. These things are increasingly noticeable, but not yet overwhelming. All that being said, I can’t resist noting that tsunamis also often start with strange behaviors in the tides, including a pullback before the full force arrives.

My recommendation to anyone who works in banking and, indeed, most workers in general, is to at least become AI-aware, or even more specifically, AI-competent. Even if AI doesn’t eliminate jobs, it will become a part of virtually every job whether that’s in a bank, a medical office, a retail shop, or many other office settings.

The comparison I think of (even though it largely unrolled before my own professional career began) is the internet. The internet certainly did destroy many jobs and quietly obliterated entire industries, but it created many others and, on net, the internet was explosive for job growth and economic growth more broadly. But workers who did not adapt to the internet as it became a normal part of the workplace and of the economy in general were basically left behind. So, too, will it be with AI tools. The Industrial Revolution, the Computer Age, the Internet, and now AI: these are the four big waves humanity has experienced over the past 200 years — and we are just starting to learn how to ride this most latest.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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See you next week for more Sunday Morning Post content. Thank you for being here, and thank you for reading.

Two weeks ago, I wrote about how AI fears are hitting the consumer, but AI is not the only thing that has people feeling on edge these days as far as the labor market is concerned. Consider the chart below of job growth over the past three years. There is still some fuzziness in the 2025 data and the numbers may change as things continue to be analyzed, but the downward trajectory of new jobs in the economy and the fact that job growth was essentially flat to negative in 2025 are clearly evident:

The past year was not just anemic as compared to recent history, but was actually the worst year for job growth since 2009. There were really only three major sectors that showed job gains in 2025: healthcare, social services including eldercare, and hospitality, which includes travel, hotels, and restaurants.

Other major sectors were down for the year, including manufacturing and warehousing (continuing a multi-year trend). Construction was mostly flat. Federal workers were down notably. In fact, in the chart above, the large decline in the October report was mostly reflective of federal job cuts. There were modest job increases in other areas of government including at the local level, such as police and public works, and in schools and education, but not enough to counteract large job losses at the federal level.

White-collar jobs including office work, banks/finance, and IT/tech were down in 2025, as well, particularly in the latter half of the year. Traditional white-collar jobs represent about 20% of all jobs in the economy and about 40% of GDP, so when there is a pullback here, it can ripple through, for sure.

As economist Heather Long of Navy Federal Credit Union put it recently, “In many ways, 2025 was both a white-collar and a blue-collar jobs recession.” That should have people on alert. A decline in both traditionally blue-collar and white-collar jobs at the same time typically happens at the outset of broader economic drops.

What were the reasons behind the weak job market in 2025? I see three major ones, some of which I have already alluded to above:

• DOGE/Federal cuts: the Federal workforce shrank by about 220,000 employees (about 10% of the overall total) in 2025. This represents a mix of buyouts, retirements in positions that were not refilled, true layoffs, and people just getting the heck out of there.

• Immigration: it is hard to pinpoint an exact number in terms of the reduction of immigrant workers who have either been deported or detained or who have simply left the workforce over the past year, but Fed economists have noted, “On average, places experiencing the biggest slowdowns in unauthorized immigration saw the biggest slowdowns in employment growth in construction, manufacturing, and other services.” Beyond construction, the impacts have been particularly notable in the agriculture, hospitality, and caregiving industries.

• AI/automation. I have written a lot about this lately (and will be doing so again soon), so I’m going to let this one mostly sit for now. Safe to say, millions of jobs are at risk through technological changes and the implementation of AI in the months and years ahead. We started to see this in earnest in the last half of 2025, which, I believe, is the main reason why job growth numbers were so low in the chart above from May onward. Some employers are either already starting to implement AI and cut jobs, or are preparing to do so.

Keeping all of the above in mind, there is also a case to be made for changes from the normal business cycle impacting the job market. Many of the large tech companies and perhaps some other traditional office-type employers overhired during the pandemic in a chase for talent and due to significant industry growth during this time. Some of the layoffs we have seen over the past year may simply be reflective of so-called “right-sizing” of workforces. That being said, right-sizing is also a convenient euphemism that a CEO can use when they want to cut workers for cost savings or because the jobs have become either partially or totally obsolete due to automation and AI, and it seems less cold and calculating.

I do also think higher interest rates over the past 2+ years have limited job growth. It is harder for businesses to grow and less likely that they will invest in themselves when the cost of financing is more significant. This is, of course, one of the reasons why the Fed actually hiked interest rates in 2023-2024, which was to actually slow things down and not allow the economy to overheat.

Low-Hire/Low-Fire

It’s not all bad news in the labor market, however. There are some enigmas, for sure. The unemployment rate of 4.3% is still at a historically healthy level, for example, and the rate is actually down a tick from December and November (if you can trust the data). People who want to work can generally find jobs, even if frustrations abound about mismatches of skills and wages. A lack of available employees is still one of the top frustrations I hear from business owners I work with, and there are plenty of concerns out there about the work ethic and skills of the next generation coming of age (which is, to be fair, a tale as old as time).

Another positive data point is that wages rose by 3.3% last year. That is nothing to write home about in the great scheme of things, but it is notable that wages outpaced inflation, which ran at about 2.7% last year. Workers therefore made slight gains relative to the rising cost of goods and services.

All in all, we are in this very strange moment where the unemployment rate is low, wages are modestly rising, there may be a jobs wipe out coming due to AI, and yet many employers say they still can’t find the workers they need.

You’re (Not) Fired

There have been plenty of anecdotal stories of companies initiating large-scale layoffs over the past year. But more broadly, however, it does not appear that companies are laying people off, en masse, at least at this point. Many companies are not necessarily hiring, but they are also not firing. This has led to what I have recently heard described as a “Low-Hire/Low-Fire” labor market.

Other than in the tech space, which is going to always be quicker to react to significant technological changes, what I am seeing right now is a subdued market for hirings and firings. Everything has basically slowed down. Instead of the normal churn of people retiring, quitting, switching jobs, or being laid off, everyone is just treading water. Hiring is weak, but layoffs are also low (other than in certain high-profile tech examples), and workers are generally staying put. People are trying to hold onto the jobs they have, and fewer workers are moving.

This treading-water mentality includes companies, too, by the way. No one wants to over-hire right now and be left with unnecessary personnel costs. Many employers are also not over-firing, because they also recognize how hard it is to attract and retain good people right now. Many others know that AI and automation are likely to provide massive efficiencies and cost-savings over time, but they don’t necessarily know what that means or how to implement it yet, so they are holding off on reducing their headcounts as there is just still so much that is unknown.

What It All Means

In researching this topic on the labor market this week, I have started to see an odd parallel to the 2020-2024 housing market. One of the major themes during that period of time was that people were essentially staying put. In the housing market, it was a combination of the interest-rate lock-in effect and rapidly rising prices that had people not wanting to give up what they had in order to move into a higher-priced market at notably higher interest rates. The effect was that the market basically froze; prices stayed elevated, but fewer transactions took place, and there was not the usual churn you need in a housing market of people coming and going, upsizing and downsizing, etc., that leads to a healthy rate of new listings and transactions. You need some movement to create opportunities for people, especially those just coming of age into the market.

A similar phenomenon is unfolding today in the labor market. Whereas a few years ago, it seemed like people were switching jobs all the time and constantly trying to move “upmarket” in terms of salary and title, today it feels more like people are increasingly trying to just hold onto the jobs they’ve got.

This is actually bad news for the labor market, particularly certain areas of it. Just as the housing market needs some healthy turnover, so too does the labor market. If people hold off on switching jobs when perhaps they otherwise could have or should have made a move, or if they delay retirement due to their own financial worries or lifestyle anxieties, if effectively “blocks” someone else from stepping into their job. And then if that person remains stuck where they are, it is a sub-optimal situation for them marked by professional frustration and financial stagnation, and also blocks someone a rung down on the ladder from moving into that spot (and so on and so forth).

The situation right now is particularly dire for entry-level workers. Not only did this generation (born roughly 1995-2010) come of age with the pandemic massively impacting their high school, college, and early professional years, but they are now trying to launch careers into perhaps the most challenging job market for entry-level workers in history. People ahead of them are not switching jobs as much and therefore creating opportunities for them, and many others are not retiring, which has down-ripple effects all the way to the entry-level. Layer on top of that a potential white-collar entry-level wipe out due to AI, and you’ve got some real pressures in this part of the labor market, which also means real problems for society. How do people grow and excel in a career if the first rungs on that ladder are not available to them? I don’t know the answer, and I suspect collectively we as society don’t know either. More on this topic to come here in The Sunday Morning Post as we try to figure it out together ourselves.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Some of the most interesting political questions are ones that cut across partisan lines in unique or unexpected ways. Business owners are more typically thought of as conservative on economic issues, for example, and yet many depend on permissive immigration policies. A devout Christian might be anti-war, anti-gun, in favor of an expanded social safety net, and pro-life. Gun owners are more commonly thought of as being on the political right, and yet many have great respect for nature and environmental conservation (I have sometimes heard these folks be described as “Green Republicans;” here in Maine, we have a lot of these types).

To me, these are not psychological inconsistencies, but rather reflect the nuance and complexity of a mature worldview. I wish more people would be open about their own beliefs that cut across the lines of the traditional political spectrum in unexpected ways. I think it would make for a healthier democracy and a more respectful political discourse.

The Rising Credit Card Consternation

One issue I have been monitoring lately that is making for some strange political bedfellows is the question of credit card interest rates. Long-time Sunday Morning Post readers may recall previous pieces acknowledging how Americans’ collective credit card debt is like a ticking time bomb. Not only is the amount of credit card debt at an all-time high, but credit card interest rates are also at all-time highs, which is quite the worrisome combination. The average credit card interest rate per the Forbes weekly tracking report this past week was just over 25%!

As one might expect with those mathematical inputs, credit card delinquency rates are on the rise; delinquencies rose to a rate of 2.98% in the third quarter of 2025, which is the most recent quarter for which data was available. This delinquency rate was up from a multi-year low of 1.53% in the third quarter of 2021, and up modestly (although closer to on par) from a pre-pandemic low of 2.60% in Q3 of 2019. I suspect when data becomes available for Q4 or 2025 and Q1 of 2026, the credit card delinquency rate will probably have pushed higher.

It’s just hard to get out of debt when interest is accumulating at a rate of 20% or more. That much should be obvious. I’m not here to judge those who accumulate a lot of debt and can’t keep up with it, and it’s not part of the scope of today’s article. What is interesting, however, is the cast of characters stepping up to the plate to take a swing at this simmering issue.

Consider, for example, the President of the United States. In January, President Trump said that he would like to see a one-year cap on credit card interest rates of 10%. “We will no longer let the American Public be ‘ripped off’ by Credit Card Companies,” the President posted on Truth Social.

Allied with the President on this particular topic is none other than Massachusetts senator Elizabeth Warren, a person the President has attacked, criticized, and ridiculed for years. The two apparently had a productive call on the topic and may have identified some significant common ground.

Senator Warren is just one member of Congress calling for action on credit card rates. Another is Senator Bernie Sanders from Vermont, who frequently rails in favor of populist economic politics and against corporate malfeasance, so it is no surprise that he is a supporter here. What is more interesting, in my opinion, is who the co-sponsor is with Senator Sanders on a bill to enact the 10% cap that Trump is supporting: Josh Hawley, a deeply conservative Republican senator from Missouri, who has called high credit card interest rates “exploitative.”

The fact that President Trump and Senators Warren, Sanders, and Hawley can all agree on an issue like this is quite notable. In a weird way, even setting aside the specific details of the proposed credit card cap, it almost gives you a glimmer of hope in this godforsaken political mess the country finds itself in that maybe leaders of vastly different political stripes can still come together.

What the Banks are Saying

Who is not as keen on a credit card cap, however, are the banks and credit card companies. It’s unclear if the Sanders-Hawley bill will get traction, even with the President’s support. But the banks and credit cards companies are certainly opposed. Of note, the American Bankers Association in conjunction with the America’s Credit Unions released a statement saying that the proposed 10% cap would harm the very people it intends to help:

This bill would eliminate access to credit cards for millions of consumers and drive them to sources of credit which are far more costly and less regulated. Many consumers who currently rely on credit cards would be forced to turn elsewhere for short-term financing needs, including pawn shops, auto title lenders, or worse– such as loan sharks, unregulated online lenders, and the black market.

The reasoning here is that a 10% cap would cause banks and other creditors to simply not offer as many credit cards. The interest rate that is offered on cards, the banks would say, is a reflection of risk, and not purely a profit play. Since many credit card borrowers are high-risk, it would be preferable to the banks and credit card companies to simply not offer cards at a 10% rate rather than absorb all of that increased risk of lending money at a rate that is not commensurate with risk.

The further argument is that by restricting credit cards, it would either push consumers into much more detrimental means of borrowing like high-rate payday lending, or it would cause people to pull back on spending altogether, which would have negative ripple effects through the entire economy. The statement further reads:

Research demonstrates that when consumers lose access to credit, they often reduce spending on essentials such as healthcare, education, and food, and are more likely to fall behind on bill, mortgage, and rent payments. Lack of a credit card would also likely reduce their consumption of items like furniture and clothing which not only negatively affects consumers, but also negatively affects the broader economy.

In response to a question on the topic in January, JP Morgan CEO Jamie Dimon said of the 10% cap, “It would be an economic disaster” that would result in a loss of access to credit cards for 80% of Americans. Dimon added, “The people crying the most won’t be the credit card companies, it’ll be the restaurants, the retailers, the travel companies, the schools, the municipalities, because people miss their water payments.”

The banks, credit unions, and credit card companies are all aligned on this point of view, although very few have been willing to speak out individually for fear of incurring the wrath of the President (and, perhaps in many ways, the public).

Funnily enough, Jamie Dimon suggested in jest that the credit card cap could be rolled out on a trial basis in Massachusetts and Vermont, the home states of Senators Warren and Sanders (not sure why he left out Missouri for Senator Hawley…). In response to this quip, Senator Warren doubled down, saying that, yes, in fact, states should be able to decide their own credit card interest limits. She then publicly called for the JP Morgan Chase CEO to support the idea.

What Happens Next

So where does this go from here? Other lawmakers including Speaker of the House Mike Johnson have expressed skepticism over a credit card interest cap. Reasons include an acknowledgement of the bankers’ statement that the proposed limit would actually reduce the availability of much-needed credit to millions of Americans, and the general laissez-faire view that the government should not have that level of control over business activity.

When President Trump brought up the credit card cap idea in January (and declared a January 20th deadline for compliance, by the way), he was largely ignored. I am sure most of the banks hope the idea goes away. With multiple senators supporting the notion, however, time will tell. I personally doubt the measure will get very far, but we are living in strange times, for sure, so I suppose you never know.

The larger context here that is particularly interesting to me is that link between the progressive left (i.e. Warren and Sanders) and the populist right (i.e. Trump and Hawley). It is almost like the traditional political spectrum becomes a circle — when you get to the very far left, you actually connect back to the very far right on some issues.

I’m seeing this in other areas right now, too. Look at the response to aggressive ICE actions in Minnesota, for example. The progressive left is clearly inflamed by what has happened there, but I’m starting to see anger from certain segments of the right, too. Those on the traditional right may not be coming from the perspective of wanting to protect their immigrant neighbors in the way that those on the left may be. Instead, many on the right are instinctively apprehensive of paramilitary troops patrolling the streets who are detaining people (including some lawful U.S. citizens) and entering people’s homes without a warrant. These images are just starting to roil some on the right the way those on the left have been feeling (although for different reasons, perhaps), creating the same “political circle” phenomenon that is evident on the much different issue of credit card interest rates.

I think it’s worth watching how many political issues over the next year or two play out through this lens of the populist wings of both of the traditional political parties coming together in unexpected ways. In its most optimistic light, this may be a source of hope for our politics — that maybe things are not so far gone that we can’t find common ground.

In a more cautionary way, however, when economic and political conditions are such that populist anger can bubble up and find unifying strength from many different points in the political sphere, history shows that this is often the kindling of revolutionary fervor. Some would say, yes, that is the point. But as I wrote about recently with regard to what is happening in Iran right now, revolutionary fervor is rarely calm and not often predictable, to say the least. Fair, it may be a stretch to say that calls for a 10% cap on credit card interest rates is the stuff of revolutions, but even large storms start with tiny raindrops, and a unifying issue between the populist left and right is something to keep tabs on.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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I was at a conference in Washington D.C. this week, and the morning keynote on the first day was given by an economics professor who specializes in AI. I am paraphrasing slightly because I wasn’t taking hard notes, but he said, essentially, “The economic value of cognitive knowledge in 5-10 years will be zero.” All of us very knowledgeable people in the room shifted in our seats uncomfortably.

The premise is this: AI technology is accelerating so rapidly that any cognitive task will be able to be completed faster and with more accuracy by bots than by humans in the very-near future. Any cognitive task. The human brain may be able to master a particular topic in, say, a year (and “master” is a loose term here), but AI can master almost any subject area in a matter of hours or perhaps a few days of complex calculations. OpenAI is said to be soon rolling out a $20,000/month AI agent that can work for your business, academic institution, or non-profit organization to the level of a PhD scientist.

I am in the early stages of drafting a two-part article series on 1) the most optimistic case for future AI impact on our country and world and 2) the bleakest case. So let me put a pin in those parts of the conversation for now, and we’ll come back to them soon.

What I am seeing anecdotally in my conversations with regular people, and what is beginning to hit the actual quantitative data on consumer confidence and American spending habits, is that people are starting to become fearful of the impact of AI on their jobs, and therefore on their own economic security. According to a recent report from Mercer, “Employee concern about job loss due to AI has surged from 28% in 2024 to 40% in 2026.” I predict that this level of concern will double again by 2027.

This comes even as there are relative signs of strength in the labor market. For example, wages were up about 3.8% in 2025. While that increase is nothing to particularly write home about, this level of wage growth did actually outpace inflation by about 1.0% last year. So on net, workers gained a bit relative to the cost of overall goods and services last year. This was not the case from 2021-2023, a period of time in which inflation generally outpaced wage growth; in those years, workers lost ground relative to costs (particularly in crucial areas like rent, housing, groceries, and utilities). So the fact that wages outpaced inflation in 2025 (they also did, modestly, in 2024), is a good thing.

The unemployment rate also remains at historically attractive levels, so people who want to work generally are able to find it (although maybe not at the wage level they want or need, to be fair). When you combine modestly rising wages with a low unemployment rate, it suggests a labor market that is relatively stable. But this is not what people are feeling.

Why? I think one main reason is that although wages did outpace inflation in 2025, people are still reeling from the inflation-fueled 2021-2023 period. Costs haven’t come down in any sort of meaningful way, and it takes a while for people’s psychological relationship with the cost of, say, a week’s worth of groceries to become re-anchored to the new income-price relationship.

But I think a big part of the story right now are fears about AI. People read the news, they see stories of layoffs starting at big tech companies, and they are starting to see AI implementation in their own workplaces. Consider the following:

• A recent Forbes report found that 75% of workers are concerned about AI causing job losses within the next 12 months. “These results suggest that, as AI becomes more integrated into various industries, the fear of job displacement presents a significant concern,” the report says.

• A Pew Research report found that people are more worried than hopeful about AI, with only about 6% of poll respondents thinking that AI will provide them with more opportunities in the workplace.

While the monthly University of Michigan consumer sentiment report does not ask respondents specifically about their thoughts on AI, there are some clues. The current readings from the report sit near all-time lows. Since the survey began in 1946, there have been only three times when the consumer sentiment reading was lower than it is today: 1) during the 1980 period of extremely high interest rates and a tough economic recession, 2) during the 2008 financial crisis, and 3) during the 2022 period of maximum recent inflation. Consumers are not feeling good right now, especially in the middle and lower parts of the wage/spending spectrum.

The January 2026 Michigan report notes that while consumer sentiment is up modestly from six months ago, it is down significantly (about 20%) from a year ago, which is a big decline in one year. The report says:

On net, modest increases in current personal finances and buying conditions for durables were offset by a small decline in long-run business conditions. While sentiment is currently the highest since August 2025, recent monthly increases have been small—well under the margin of error—and the overall level of sentiment remains very low from a historical perspective. Concerns about the erosion of personal finances from high prices and elevated risk of job loss continue to be widespread.

I’ve added the bold emphasis on the last line, which I believe is indicative of AI fears. As mentioned, there have been plenty of stories in the news over the past six months about AI and the automation and consolidation of jobs, and people in all walks of life are fearful right now that their jobs could be eventually eliminated. If the economist who I heard speak earlier this week is correct, many of us are right to be afraid of what the labor market will look like not just 5-10 years from now, but perhaps even 1-2 years from now (more on that in an upcoming article).

What It Means for Spending

When people are feeling uncertain about the economy and about their own place in it, they tend to pull back on spending, particularly on big-ticket items like home purchases and other significant life moves. And for better or worse, we are a consumer-driven economy. If people pull back on spending, it will have negative ripple effects through everything.

What does this look like today? Look at the housing market. The average number of existing homes sold nationwide over the past decade has been about 5.2 million per year. But in both 2024 and 2025? The number was just over 4.0 million, a notably low amount by both recent and historical standards. Those years mark the lowest levels of home sales since the mid-1990s, made all the more notable in that the population is higher today than it was back then, so on a nominal basis, there should be many more sales today than there were back then.

A large portion of the decline in new home sales can be attributed to higher interest rates, especially in 2024. But what is all the more notable about the low home sale totals in 2025 is that conditions for homebuyers have actually improved over the past year: interest rates are lower, prices have eased off and even dropped in some markets, and there are greater options and less competition in the market. Buyers should be coming back to the market now and not staying on the sidelines, at least based purely on quantitative conditions out there.

The National Association of Realtors is certainly hoping so, having flagged in their monthly report this past week that existing home sales in January were down 8.8% from December, which is a notable drop even in this cold time of year. Home sales were down 4.4% as compared to January 2025. This comes even as prices have stayed relatively flat (up just 0.9% nationwide year-over-year). The Realtors noted that wages are now outpacing home price increases by a somewhat healthy margin, further evidence that buyers should be coming back into the market, and yet they are not, at least not yet. We will see if they start to this spring as the weather and, perhaps, the housing market thaw.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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Weekly Round-Up

Here are a few things that caught my eye this week:

• The New York Times had a podcast about prediction markets (last week’s topic here at The Sunday Morning Post) that provided a great overview. Listen to it here or wherever you get your podcasts.

• Aziz Sunderji wrote a piece for his Home Economics Substack series about condos losing value relative to single-family homes. The reasons? Harder financing terms and rising insurance costs, among others. You can read “The Condo Crisis” here.

• Homebuilders in South Texas are asking Trump to lighten up on immigration enforcement at construction sites. A key line from the article in Politico:

  Construction executives have held multiple meetings over the last month with the White House and Congress to discuss how immigration busts on job sites and in communities are scaring away employees, making it more expensive to build homes in a market desperate for new supply. Beyond the affordability issue, the executives made an electability argument, raising concerns to GOP leaders that support among Hispanic voters is eroding, particularly in regions that swung to Trump in 2024.

  Representative Henry Cuellar (D-TX) reported out of his meetings with the South Texas Builders Association, “They started off with, ‘hey, we were all Trump supporters, and we thought he was going to secure the border and then kick out criminals, we just never thought that they were going to be coming after our folks, our workers, on that.’”

You can read my prediction article of this reality that I wrote one year ago, when I said:

The impact of mass deportations of immigrants, not to mention the anticipated declines in new migrants coming to the United States, will be devastating to the home construction market. I don’t care what your politics are on immigration, illegal or otherwise; the home construction market depends on immigrant labor. This is a fact…

…Now comes the part where politics meets policy, which then intersects back with political reality. There are many wealthy donors, for example, particularly on the Republican side, who own real estate firms, construction businesses, and farms (which, as noted above, are also specifically and significantly dependent on immigrant labor). Where will their support of Trump and his hard line on certain topics like immigration run afoul of their own bottom lines? It’s worth following, and is likely to lead to political and economic fireworks in the months ahead.

And so it has come to pass.

One of my favorite movies is the 1994 cult classic comedy Dumb and Dumber, and one of my favorite jokes in that movie is when Harry tells Lloyd he doesn’t gamble, and Lloyd tells him, “Twenty bucks says I can get you betting by the end of the day…I’ll give you 3-to-1 odds.” After some back-and-forth, they shake on the deal, and Lloyd immediately starts scheming in his head about how he is going to get Harry to bet with him. “I’m going to get you. I don’t know how, but I’m going to get you!”

Gambling in America has a long and sordid history. From riverboat card games and backroom bookies to Las Vegas ballrooms and neon glows to state-run lotteries and horse tracks, betting has always existed in a strange moral gray zone. Gambling is simultaneously condemned, tolerated, regulated, quietly encouraged, and much beloved by many.

For most of the 20th century, gambling was officially frowned upon, driven underground by law but sustained by demand. Even when states began legalizing certain forms of gambling, the public posture remained cautious, as though gambling was a vice best kept to the edge of town and out of public view (and sometimes literally underground).

Now, in many states, you can gamble on virtually any professional or college sporting event around the world at any given moment from your living room, bedroom, or breakfast table. Gambling provides entertainment to millions of Americans, but also destroys lives in the same ways it always has.

Legal sports betting has become the vice of choice for millions of Americans, particularly young men. This a country that loves to bet, and has spent decades becoming more comfortable with which bets are acceptable and how those bets can and should (or should not) be regulated. The impact of sports betting on how Americans consume sports is worth its own article at some point.

That said, as we approach the pinnacle event of the American sports world, the Super Bowl, betting on sports has reached an all-time apex. With sports gambling now legal in 39 states plus Washington D.C., nearly $2 billion will be bet (legally) on the Big Game. Millions of Americans will be watching the Super Bowl not just to see who wins the game (or what the best commercials are), but whether Sam Darnold will throw an interception, whether Rhamondre Stevenson will run for more than 61 yards, or whether the game will end with an odd or even number of points. There are over 2,000 different unique things you can bet on in this one game, including countless live bets within the game that evolve and adjust based on how the game itself is unfolding.

Even as the bets roll in in record numbers, however, the sports betting market is facing some unexpected pressures. “Gambling” in the United States, and, as we will see, the term “gambling” is evolving, is entering a new phase with the sudden rise of prediction markets.

The “Bet On Anything” Era

First, a primer: what are prediction markets?

At their core, prediction markets allow participants to buy and sell contracts tied to the outcome of future events. A contract generally pays out $1 if an event occurs and $0 if it does not. If that contract is trading at 63 cents, the market is effectively saying there is a 63% chance the event will happen. If you bet and win, each “contract” you have purchased for 63 cents is worth $1 at the end, a profit of 37 cents per contract. Alternatively, if your pick loses, your 63 cent bet on each contract becomes $0 (i.e. worthless). Prices move as new information enters the system, and the collective judgment of thousands of participants, each with money at stake, produces a real-time probability forecast. For the Super Bowl, for example, you can buy contracts on the Seattle Seahawks to win for 69 cents, and you can buy the New England Patriots for 33 cents. This reflects the fact that the Patriots are underdogs, and you can buy them to win for less than you can buy the Seahawks.

The concept of prediction markets has existed in academic and experimental forms for decades, often quietly outperforming polls and expert forecasts. What is new is their migration into the mainstream, fueled by better technology, regulatory openings, and a public newly comfortable with wagering on events and circumstances far beyond the playing field. People want to bet, and they don’t just want to bet on sports.

You can now bet (or “purchase contracts,” to use the technical/regulatory term) on who will be the Democratic and Republican nominees for president in 2028. You can bet on a range of prices of where the S&P 500 will close the year. You can even bet on things like whether the Supreme Leader of Iran will be out by certain dates (contracts are trading at 9 cents that he will be out by March 1st, 20 cents he will be out by April 1st, and 38 cents that he will be out by September 1st). You can bet on which movie will win Best Picture as the Oscars later this month, and even who will attend the Oscars (Taylor Swift is currently an available bet at 22 cents, reflecting the market’s likelihood that she will not be in attendance; if she were expected to attend, her price would be something like, say, 80 cents). You can bet on what words and phrases the announcers will say on-air during the Super Bowl, or what Donald Trump will say in his next interview on Fox News.

The most prominent regulated prediction market in the United States today is Kalshi, founded in 2018. Kalshi is notable because it operates as a federally regulated exchange, overseen by the Commodity Futures Trading Commission (CFTC). Instead of positioning itself as a gambling platform, Kalshi frames its contracts as event-based derivatives. This jargony regulatory status gives Kalshi a legitimacy that few others can claim, even as it continues to test the boundaries of what counts as a “financial” event. Kalshi CEO Tarek Mansour has said, “The long-term vision is to financialize everything and create a tradable asset out of any difference in opinion.”

Then there is Polymarket, launched in 2020, which has exploded in popularity despite being technically unavailable to U.S. users. Polymarket operates offshore and uses cryptocurrency-based settlement, allowing users to wager on everything from geopolitical outcomes to cultural events. It is fast, liquid, and remarkably comprehensive, but it exists largely outside the American regulatory framework, and has drawn scrutiny from U.S. authorities. Odds are high that Polymarket will be fully available in the United States eventually, however. The NHL, MLS, and UFC have all done promotions with Polymarket, and live Polymarket odds were recently included on-screen at the Golden Globes on a trial basis. Again, this is a country that likes to bet, and you can bet on the fact that you’ll be hearing a lot more about Polymarket and Kalshi in the months and years ahead.

This is where the definitional debate begins to matter. Are these platforms gambling? Or are they tools for aggregating dispersed knowledge about the future (i.e. information markets)? The answer depends less on economics than on law and culture. Sports betting is regulated by gaming commissions. Prediction markets, when allowed at all, fall under financial regulators. The same act (i.e. risking money on an uncertain outcome) becomes something entirely different depending on the label attached to it.

And that distinction is becoming harder to maintain. As prediction markets expand beyond interest rates and elections into increasingly granular questions about the world, they begin to look less like niche forecasting tools and more like a new kind of betting ecosystem, one where you can wager not just on who wins the Super Bowl, but on how the future itself will unfold.

Of note, by the way, Kalshi, in my opinion, clearly provides a technical workaround for people who want to wager on sports but where sports betting is not legal. Sports betting is legal in 39 states, but, surprisingly, in my opinion, is not allowed in California and Texas (and nine other states), where voters and policymakers have rejected previous attempts to allow sports betting. But you can use Kalshi in Texas and California alike, and plenty of people in those states will certainly be betting on the Super Bowl through prediction markets. It’s quite a wide-open loophole, at this moment in time.

I think of my own state of Maine, where sports betting has been long debated and where there have been lengthy deliberations in the Maine Legislature and, more generally, in the court of public opinion. Sports betting is legal here, but is limited to only certain platforms like DraftKings and Caesars. But then, all of a sudden, Kalshi comes in, and anyone can “bet” there with very little regulatory oversight. It sort of makes you wonder. The burden of proof was so high for DraftKings to get into the market, for example, and then a prediction market like Kalshi comes in almost seemingly overnight with very little oversight or resistance.

The Promise

Despite the fuzzy legal framework and eyebrow-raising ethics of wagering money on world events (like the downfall of a world leader), proponents of prediction markets would tell you these “markets” actually play an important role. We live in an age where individual expertise is not valued as much and often not trusted or even respected. Newspapers have been doing away with editorial and opinion pages, with the belief that readers do not care as much anymore what subject-matter experts or social commentators have to say on important matters. There is also just a belief that these so-called experts are not often right, or that they are so biased towards one political view (and often getting paid to have that point of view) that it is impossible to trust what they are saying. Prediction markets, on the other hand, broaden the expertise and democratize the predictions.

How have prediction markets done? In the days leading up to the 2024 U.S. Presidential Election, for example, most media pundits and political observers pegged the Donald Trump-Kamala Harris race as essentially a 50-50 toss-up. Prediction markets starting tipping towards Trump in the last few days, however, providing a signal that there were some out there watching and analyzing the data in a way that the mainstream media and so-called experts may have missed or couldn’t see showing Trump with traction leading up to Election Day.

Politics and the presidential election aside, however, the real value in prediction markets is that they aggregate wisdom and insight from a broad pool of observers, or market participants. Decades of evidence to previous non-corporate prediction markets (which were largely in the academic fields) suggest they often outperform polls, expert panels, and forecasts made in isolation. That makes them useful not just for sports or elections, but for economics, public policy, science, and business planning. At their best, prediction markets reward being right rather than being loud, partisan, or persuasive. They don’t eliminate uncertainty, but they quantify it, and in a world drowning in overconfident (and often bombastic) takes, that alone is a public good, many would say.

The Perils

The rise of prediction markets does raise some important questions and concerns. First and foremost is that many people will certainly lose a lot of money betting on these platforms. According to one analysis of Polymarket users, 70% of users generally lose money, and the vast majority of gains go to a very small sliver of the market; 0.4% of users take home 70% of the profits. This is, in many ways, not too dissimilar from other betting platforms like DraftKings.

There is also just the concern, as alluded to above, that it feels uncomfortable to see people betting on world events that impact hundreds of millions or even billions of people, often detrimentally so. Prediction markets have offered “bets” around questions of whether certain areas of the world would experience famines or flooding, for example. It feels morally or ethnically suspect to bet on such a thing.

Proponents would flip these questions on their heads, however, and say that actually a broad market of localized, specialized expertise on environmental questions is quite valuable in that it can help policymakers and businesses plan and react to such crises. There are anecdotes of people in California looking to prediction markets to get an understanding of when wildfires would be fully contained as a way to know how much danger their neighborhoods were in. Prediction markets were seen (by some) as more accurate in these complex, high-pressure situations than talking head expertise on TV or in the government.

Ultimately, the Venn Diagram of prediction market supporters overlaps quite heavily with those with a libertarian sense of allowing people to do what they want, bet what they want, and experience the consequences of those bets as they unfold. In fact, the rise of prediction markets has largely been fueled by technologically savvy, libertarian leaning users who don’t have a problem putting their digitized and data-centric points of view up against the world. Many of these people just don’t care about the ethnical perils or pitfalls of betting on world events, for better or worse, or they can justify it by pointing out the actual value in such markets, as noted above.

The Insider Problem

There is one other reality of betting on these platforms that is not yet resolved, and may not ever be, and that is the problem of insider betting. Consider the following: in early January, a Polymarket bettor with a username of “Burdensome-Mix” suddenly bet over $30,000 that the president of Venezuela, Nicolás Maduro, would be removed from office before the end of January. That outcome came to pass when U.S. forces mounted a surprise operation and captured Maduro.

When the bet resolved, the trader walked away with a windfall of more than $400,000, roughly a twelve-fold return on their stake. One of the interesting things was how sudden and unexpected the Maduro bets were, and that they came from an unknown newly created account. That setup has led legal and financial experts, as well as lawmakers in Washington D.C., to speculate that the bettor may have had access to non-public or classified information about the planned operation. Such access, if true, would resemble insider trading (i.e. exploiting confidential knowledge for financial gain) albeit in a prediction market that operates with far lighter regulation than traditional stock or futures exchanges.

The event has ignited debate over how prediction markets should be regulated, with some lawmakers pushing proposals to bar government employees and officials from placing such bets when they have access to sensitive information. Critics argue that platforms like Polymarket lack the guardrails that exist in regulated financial markets, making them ripe for abuse if insiders take advantage of privileged intelligence.

The Maduro bets also raise the clear and simple concern of whether people with privileged, sensitive information about military operations are using that information to make a profit and, with it, risk revealing government secrets through their betting patterns.

For the integrity of the platforms, the insider risk is relevant to many other types of bets, too. You can bet on what Bad Bunny’s opening song will be during the Super Bowl halftime show. There are probably several hundred people who actually know what it will be; they have to plan these shows out, after all. And all of those hundreds of people have family and friends who might try to get inside information from them, any one of whom could then bet on these platforms. But, I suppose, from the libertarian perspective on this, that’s just how it goes.

The Future of Prediction Markets

The trend in gambling (or “contract purchasing,” to be technical) is in more permissive and expanded use. With that in mind, prediction markets are only likely to become more ubiquitous over time. Americans like to gamble, and, increasingly, they want to bet on more than just sports. I put some money into Kalshi this week to test it out, and it was fun. I did not “bet” anything I could not afford to lose, but it was fascinating to follow sports in real time on the platform, and also to look at some of the key political races in Maine this year, which have all types of odds (some of which I intuitively agree with, and others of which I do not).

I think what is most likely to come eventually is that the regulators will catch up with prediction markets, and tighten up on how these things are run. It may not happen immediately, though. If anything, the Trump White House has been generally permissive of prediction markets. Whereas the Biden Administration essentially banned Polymarket from operating in the U.S., the Trump Administration has eased enforcement against such entities, essentially clearing a path for Polymarket to eventually return. Richie Torres, a member of the U.S. House of Representatives from New York, has introduced a bill that would limit federal officeholders and staff from using prediction markets, but it is unclear where this will go.

Ultimately, my belief is the prediction markets are not going away, and will probably become more prominent in the months and years ahead. Sports betting companies like DraftKings and others, are, in fact, trying to find ways to get into the prediction market space themselves, which is a fascinating twist over the past year, and evidence that the foundation underpinning any business model is subject to rapid change at any time. A year ago, prediction markets operated at the fringe of betting and academia; now they have just about become mainstream with the mainstream sports betting sites not trying to figure out how to chase them.

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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.

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I’m experimenting with Kalshi for the Super Bowl and I don’t mind sharing my picks with you. These are for entertainment purposes only. The real question is can I write off the losers as a business expense! Here we go:

• Will Seattle win by 4.5 points or more. My pick: NO (49 cents).

• Will Seattle score more than 28.5 points. My pick: NO (62 cents)

• Total Points Scored over 43.5. My pick: YES (58 cents).

• Drake Maye touchdown (has to be rushing or receiving; passing TD does not count for this bet). My pick: YES (24 cents).

• TreVeyon Henderson 20+ rushing yards. My pick: YES (53 cents).

• Will Jaxson Smith-Njigba have the most receiving yards in the game. My pick: YES (62 cents)

• Will there be 2+ successful 4th down conversions. My pick: YES (54 cents)

• Will the announcers say “Robert Kraft” during the broadcast. My pick: YES (89 cents).

• Will Taylor Swift attend? My pick: NO (70 cents).

• Will the Halftime Show last at least 14 minutes. My pick: YES (64 cents).

• Will a QB win the Super Bowl MVP: My pick: YES (73 cents).

• Will the Patriots win the game. My pick: YES (33 cents).

Let’s go Pats!