President Trump’s recent comments and the subsequent sharp decline in the stock market serve as a stark reminder of Wall Street’s unpredictability. They urge us to approach financial planning cautiously and explore more stable investment avenues.
The recent stock market downturn, triggered by President Trump’s comments, underscores the unreliability of Wall Street as a dependable platform for financial planning, prompting us to seek more secure investment strategies.
Speaking on Fox News on Sunday, Trump stated, “There is a period of transition because what we’re doing is very big.” It is my responsibility to establish a robust nation. You can’t keep an eye on the stock market.
It is impossible to keep an eye on the stock market.
The following day, the Dow Jones Industrial Average dropped 2.1%, or 890 points. In contrast, the tech-heavy Nasdaq Composite experienced its biggest slump since 2022, falling 4% into correction territory, while the S&P 500 sank 2.7%. Every primary index dropped below its levels on Election Day.
Each of the main indexes dropped below its levels on Election Day.
Real estate is still a reliable investment if you would rather have drama on stage and the big screen than in your asset portfolio, even in light of the recent stock market volatility. After the 2008 financial crisis, even Warren Buffett, an expert at carefully choosing stocks, acknowledged: “If I had a way of buying a couple hundred thousand single-family homes and had a way of managing them … I would load up on them.” Mortgages with really cheap rates are what I would take out.
The Appeal of Real Estate
Taking a broader view, why do so many individuals invest in the stock market if it is such an unstable investment?
Particularly when beginning, leveraging, and developing a portfolio of residential properties, real estate is rarely passive. Tenants, repairs, and turnover throw most busy investors out of their comfort zone, especially now that interest rates are rising and insurance premiums are skyrocketing. There is a drawback to not being involved, though, like with stocks.
Last year, Grant Cardone told GoBankingRates, “You do not need a lump sum in an IRA or 401(k) when you hit retirement.” When you retire at age 65 or 68, you’ll need money to cover your living expenses. I would search for automobiles that will provide you a monthly income once you retire.
“I started looking for the asset class where I couldn’t lose money when I was thirty years old,” Cardone explained. This implies that since money is losing value, I can’t just save money. Because I could lose money, I can’t be in the stock market.
As Cardone correctly notes, “There’s only one asset class that does all that,” since real estate generates passive income, increases in value over time, and provides tax write-offs. It’s real estate, not gold, silver, Bitcoin, or the stock market.
Why Stocks Are Important
In several recent cases, the potential for growth in the stock market has been more promising than anything real estate has been able to offer. The AI explosion, spearheaded by the innovative GPU manufacturer Nvidia, is a testament to this. Their share price has soared over the last five years, a staggering increase of more than 2,000%!
Even Nvidia’s staff probably had no idea how successful their business would become. It is uncommon to be able to forecast such rapid expansion; if it were, we would all have made investments.
The stock market would have performed well for you even if you had invested in real estate-related stocks, such as Home Depot, several successful REITs, and Bankrate’s selections—Champion Homes and Builders FirstSource—instead of Nvidia or the stocks of other tech behemoths like Apple, Amazon, or Microsoft. It would have eliminated the headache of managing rental properties, which is crucial for investors.
As Cardone points out, the stock market may seem like a more equitable casino, but it’s still a casino to the average investor. The sophisticated knowledge required to evaluate a company’s performance portfolio is a barrier. In contrast, real estate offers a sense of control and stability. While it’s not without its hazards, they are less severe and can be managed through proactive measures like removing problematic tenants, making repairs, and making the right investments.
For investors who don’t mind a less passive strategy than the stock market, real estate becomes attractive when considering the advantages of appreciation, leverage, cash flow, and depreciation.
A Challenging Spring
Potential cash flow has always been one of the main benefits of real estate ownership over stock ownership. It has been challenging to argue for this in an environment with high interest rates like ours. This implies that you won’t have cash flow shortly unless you pay cash for your real estate or make a sizable down payment.
While the high cost of homes may make a spring thaw unlikely, it’s important to remember that real estate, like the stock market, is a vehicle for long-term wealth building. Both real estate and stocks have a history of increasing in value over time. The tax advantages of real estate further enhance its potential, making it not just a viable investment, but a vehicle that can potentially pay for itself, even in a challenging market.
According to Brian D. Luke, chartered financial analyst and head of commodities, honesty, and digital assets at S&P Dow Jones Indices, “we are a few years away from peak home price appreciation of 18.9% observed in 2021 and are seeing below-trend growth over the index’s history, even though our National Index continues to trend above inflation,” Luke told Forbes.
Investors in real estate today are in a favourable position.
The challenging real estate market will only boost demand for rental properties, so investors who already own real estate won’t have trouble finding renters willing to pay market rates. Additionally, home prices will likely rise due to the overall scarcity of housing inventory.
“Until mortgage rates are back down in the low-5% range, I don’t expect to see a meaningful increase in the supply of existing homes for sale,” Rick Sharga, the founder and CEO of the market intelligence and business consultancy firm CJ Patrick Company, told Forbes.
In the same article, Keith Gumbinger, vice president at online mortgage company HSH.com, stated, “More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in aggregate than today’s.”
In the meantime, investors who are afraid have turned directly to bonds due to this week’s stock market turmoil. After hovering at 4.5% at the end of February and 4.8% in January, the 10-year Treasury yield has now dropped to 4.3%. This is important for real estate investors because 30-year mortgage rates are usually correlated with the yield on the T-bill. Because of this, mortgage rates have already started to decline; as of Wednesday, they were 6.8%, down from 7.1% a few weeks prior.
