Photo Credit: Pixabay A major reversal of stock market trends and trading prices should be no surprise. Analysts have been warning it is coming for years. The big question is, how will it affect businesses, investment trends, and real estate? The Wall Street Journal reports that the latest 10% drop of the Dow Jones at the beginning of February 2018 puts the stock market in new correction territory. When these shifts happen there are generally several bumps, with drops and minor rebounds before the real plunge. Analysts have been heralding this fall for a long time. Estimating that the market has been at least 60% overvalued. When corrections happen, they often overcorrect as well. When US president Obama took office in January 2009 the Dow Jones fell to just 7,949. That could mean the potential for the market to fall almost 20,000 points before getting back to par at the beginning on the last bull run. That's enough to wipe out most individuals retirement plans and nest eggs, if they haven't heeded the signs and followed the big smart money out of stocks yet. While the forecast has been positive for the general economy and real estate for 2018, through 2020, the domino effect of a major stock market crash can have widespread side effects. One of the most notable is eventually seeing more consumer spending and time spent at core service retailers and local shopping plazas. Parents with kids may take advantage of more free and low cost entertainment at these venues. While more consumer dollars go to basics like pharmacies, grocery, bank branches, cheaper restaurants, nail salons, auto parts stores, and discount retailers. More immediately we should expect to see individuals yanking money out of stocks, and putting it into more tangible and safer assets like real estate. It may seem hard to find attractive and viable deals among condos and single family homes in many major US and Canadian cities today. However, there is value, reliable income, and growth potential still to be found in commercial real estate. Particularly in local retail plazas and mixed use properties with rental units. One extra plus for those shifting more away from stocks to real estate is the ability to leverage the investment capital they have left. They can be leveraged with partnerships, and commercial capital, of which there is an estimated $1T of dry powder in cash to be invested by big funds this year. Summary Investors may be further fooled by some rebounds in stocks. Yet, sooner or later, a major correction appears inevitable. Smart money is exiting stocks now, in search of safer investments, with growth and income potential. Some of the best opportunities may be waiting in local shopping plazas.
- June 2, 2017
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