3 Honest Facts About Stocks, Prices and Real Estate Right Now

Like most investors, I have most of my retirement fund invested in stocks. And like many investors, I’ve been whitewashing it for a month now as my portfolio is declining.

The war with Iran has thrown the stock market, now down 5 weeks in a row and entering a correction zone, meaning it is down 10% or more.

Interest rates skyrocketed and gas prices crossed $4/liter, up more than $1/gallon from pre-“trip” levels.

When will this all end and when will stock prices recover?

I recently asked for artificial intelligence (Gemini Pro, specifically) to install. Here are the words of the question I asked, also known as the prompt:

He is one of Wall Street’s leading experts on economics, stocks and interest rates. Investors are watching their savings get drained as higher interest rates and gas prices threaten to send inflation higher and stocks lower.

Investors want advice and look to you for answers. They want to know what will happen in three specific areas: stocks, interest rates and the housing market. What will you tell them?

First, I will give you the answer provided by AI, and then I will give my opinion from my more than 40 years of stock market investing and advising.

Here is the answer from AI

You’ve seen your savings get killed, and you’re not alone. Between rising fuel prices and ever-increasing interest rates, inflation threatens to turn the stock market upside down.

People are crying for answers. They want to know when the bleeding stops and what to do with their money right now.

According to Bloomberg, the latest inflation data appears to be much stronger than what experts had initially predicted. That means the era of easy money is dead.

Here’s what to do about stocks, interest and the housing market.

1. Stop waiting for the stock market to save you

Fact: Wall Street is buzzing because the days of falling prices are gone, at least for the foreseeable future. High gas prices directly eat into business profits and consumer wallets, meaning stock prices will remain stagnant.

Strategy: Stop trying to put the time down. It is a fool’s errand. Instead of panic-selling your entire portfolio for cash, you need to focus your investments on quality. Look for companies that make large amounts of money and pay consistent dividends.

If inflation is hot, you want to have businesses that can pass on their higher costs directly to the consumer without losing a single sale, like drug companies. If you hold on to speculative, unprofitable technology stocks in the hope that they will magically rebound to their past values, you will burn out.

2. Search the interest rate area for guaranteed income

Fact: High interest rates are a nightmare if you’re carrying credit card debt, but they’re golden if you have cash sitting around.

Strategy: The Federal Reserve keeps interest rates high to fight inflation. That means you can be paid a very respectable return without taking on the risk of the stock market. If you have money sitting in a regular checking account that doesn’t earn zero points, you’re losing money to inflation every day.

Move your cash to a high-yield savings account, buy a short-term bond fund or lock in a certificate of deposit. You can easily get yields going around 4% or 5% right now.

Take guaranteed money while it’s sitting right there on the table.

3. Face the reality of the housing market

Fact: Buyers are gone. You have high home prices that go hand in hand with high mortgage rates, creating the most affordable housing market we’ve seen in decades.

Strategy: You need to erase the idea of ​​a 3% mortgage from your memory. It’s not coming back soon. If you sit on the sidelines hoping for a housing crash that will let you in and buy cheap, you will be renting for a very long time.

If you find a house you like and can easily afford the monthly payment today, buy it. If prices eventually drop down the road, you can always get a refund. But if the purchase stretches your monthly budget to the limit, stay put and continue renting. Don’t let the fear of missing out force you into 30 years of financial prison.

Now, here is my opinion

What’s happening in stocks, interest rates and real estate these days is wild, but it’s not complicated.

Trump’s “trip” to Iran is fueling inflation and threatening the global economy as higher fuel prices and interest rates filter through the financial system.

Remember that high gas prices aren’t just something you hear when you fill up. They increase the value of everything that is transported, which is everything. And oil is an important ingredient in many products, from plastics to fertilizers.

Higher prices obviously increase money, but they also hurt the economy, as more of your disposable income goes to electricity and less to other things.

As I said before, the depth of the damage to the world economy depends on two things:

• How long does the war last
• How long does it take to repair the damage

When the war ends, which we hope will be soon, things will not return to normal any time soon. The Middle East’s damaged infrastructure will take months, even years, to rebuild. This will keep oil prices high for a long time, which will keep interest rates high for a long time.

The danger is that high prices and a slow economy will lead to a situation known as stagflation: a combination of high inflation and a weak economy.

If it continues long enough, it could cause a recession.

What I’m doing now

Although I have invested a lot in the stock market, I have always kept a lot of money aside. Even though I don’t expect a quick market reversal, I’ve started periodically putting a small amount of that money into the Invesco S&P 500 Equal Weight ETF.

Since rates are high, I also want to add to various bond funds in my retirement accounts. But I’ll wait a little longer to see if they can get cheaper as inflation starts to slow down and prices go up further.

In short, I’m doing a dollar amount of expenses in stocks and for now, at least, I’m waiting to add to fixed income investments.

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