Taking a break from stocks

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Today we’re talking about why retail investors are taking a break from the stock market, why real estate is now the new favorite, and how you can use this information to build wealth long term:

A study from the Federal Reserve Bank recently found that 90% of respondents preferred owning their primary residence, rather than invest in the stock market. They also favored the idea of being a landlord, with over 50% of them saying that they would chose a rental property over stocks.

When asked about their preferences, the SINGLE BIGGEST REASON that investors preferred housing was simply just: STABILITY. Besides that, housing was seen as less volatile since the price won’t fluctuate 10% day by day, it was also seen as more affordable than renting, and – people believed it would give them a higher return, long term, with plenty of leverage and favorable tax savings.

BUT…in terms of where we go from here…and the future of our investments between both real estate AND the stock market, here’s what was said:

First, on Sunday – during an interview for 60 minutes, Jerome Powell said that our economy is at “inflection point,” as growth and job creation is poised to accelerate. He says that our economy is going to start growing MUCH more quickly, and that the overall outlook has brightened substantially…only IF there isn’t another round of shut downs.

Morgan Stanley doesn’t quite agree, and they have an early warning sign to keep an eye on in terms of where the markets might be headed:

They say that the dramatic re-opening is “going to be more difficult than we’re dreaming about,” and that, NOW – there might be surprises that are not yet priced in.

First, it’s concerning that investors are taking a break from the stock market – because, to me, this represents more of an emotional response to peak pricing than a logical one.

Right now, there’s $4.5 TRILLION DOLLARS of institution and retail money in money market funds, sitting on the sidelines, just WAITING for a drop to begin buying in. It’s expected that this might continue pushing prices higher, and any short term correction will quickly be bought up along the way.

The CEO of JP Morgan, Jamie Dimon, also thinks that the economic boom may last through 2023, which could very well justify current levels, since markets are pricing in growth and excess savings that make their way back to stocks.

BUT…at the end of the day, the reality is – successfully opening the economy will be challenging, and it’s impossible to tell how much is already priced in, or if we’re getting ahead of ourselves in terms of of how quickly this will happen.

I’ve made the choice just to keep buying, regardless of what happens, because if you don’t need the money for another 10-20 years, it doesn’t make much of a difference right now, anyway…but, keeping too much cash on the sidelines is NOT a wise decision, because study after study shows that – 66% of the time – investing your money right away is going to give you a higher return than slowly trickling it into the market.

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