Paper Wealth and Housing: What it Means for Investors Looking Forward

[TradeSmith Daily]( Paper Wealth and Housing: What it Means for Investors Looking Forward Have you ever noticed that when the economy is doing well, it seems like people are spending more money even if they don’t make any more? Economists studied this phenomenon for years and came up with the theory known as the “wealth effect.” It states that when things like housing prices and stock prices rise, consumers and businesses spend more money even if they have no increase in disposable income. Imagine owning a home that was worth $200,000 and it’s now worth $400,000. Even if you still make the same amount of money as before, and even though there aren’t actually more dollars in your bank account, you feel wealthier and thus spend more. The same thing applies to everything we own, with home prices and stocks leading the charge. The Federal Reserve measures this through household net worth, which is the total value of all a household’s assets, both financial and non-financial, minus any open liabilities. The chart above shows how household net worth increased almost constantly over the last decade, with a small downturn in 2019 and in 2020 as a result of equity market pullbacks. Today, just like with those downturns in 2019 and 2020, we are seeing household net worth edge down as the stock market drops and real estate values rise. However, with the Fed in full hawk mode, I don’t expect home prices to continue their upward trend forever. And that could strongly affect how the economy behaves from here… and what the Fed decides to do about it. RECOMMENDED LINK [Buy Alert for $2 Coin]( The man who picked bitcoin in 2014 when it was trading for just $369... Picked Ethereum in 2016 when it was trading for just $7... And even warned his followers of the 2020 crash... [Now believes a tiny $2 coin is set to SOAR!]( Maybe even as soon as Friday, July 1. So if you missed bitcoin and ethereum... this could be your final chance at mind boggling crypto gains. Learn how to get in front of this massive opportunity... [Click here now before it’s too late]( How Housing Impacts the Economy During the Great Recession, we saw the outsized impact housing has on the global economy. Housing is the most expensive item consumers purchase on credit. Thus, when it loses value that is realized through a sale or repossession, it becomes a major problem. Fortunately, today’s borrowers are infinitely more creditworthy and banks much better capitalized than they were back then, so it’s very unlikely that we’ll see the extremes that fueled the last collapse. The silver lining to an expensive housing market is that everyday consumers use home values to gauge their wealth more than any other asset. Home ownership is a symbol of the American Dream and for many, the single greatest store of wealth over a lifetime. So when home prices decline, people pull back on spending. And current trends indicate that a decline may be on the distant horizon. Prices are continuing to climb for now, but last month’s new residential sales plunged to pre-pandemic levels. U.S. Census Bureau More recently, existing home sales have dropped 3.4% since April and 8.6% since the year before. [National Association of Realtors]( This decrease in sales implies that buyers are stepping back from the market as higher mortgage rates and home prices make ownership less affordable. And while homeowners may have higher-valued properties, it doesn’t do them much good when buyers are scarce. The value is merely “paper wealth”; they can’t realize those gains until they actually sell their home. RECOMMENDED LINK [Today he earns up to $20,000 a week*]( We checked in with Rob after he sent this mind-melting review. Here’s a snippet from the email he sent: “Keith Kaplan... I send my accolades out to you. I've been trading for 8 weeks. I'm up $20,000 per week – that's $160,000 total. I think this service is phenomenal.” While results like Rob’s aren’t “normal” by any stretch... after reading that email, I HAD to follow up with him. So he agreed to hop on a phone call... It was an eye-opening 45-minute conversation where Rob told me: “As of Friday last week, I am up $284,000.” I knew my readers had to hear about this... [So I included more of Rob’s story — including a VIDEO “demo” of the same type of trade on this website (click here)](. *The investment results described in this testimonial are not typical. Investing in securities carries a high degree of risk; you may lose some or all of the investment. The good news here is that slower home sales can dampen consumer demand far faster than any other asset, and decreased demand will help bring inflation in check. That’s part of how the Fed can drive down inflation without actually putting the economy into a recession. If people stop purchasing on their own accord because they’re worried about the state of their bank accounts, that can leave the Fed more freedom to end fiscal tightening sooner rather than later. So what does this mean for investing right now? I’m focused on managing risk in the short term while keeping an extensive watchlist of equities I see as too far oversold and pounding the table on finding income-generating stocks that have strong moats. Enjoy your Thursday, [Keith Kaplan]Keith Kaplan CEO, TradeSmith P.S. Despite raging inflation, a depressing bear market, and the actions of a hawkish Fed, you could have a shot at underwriting the “wealth effect” — with actual wealth. Every stock in your portfolio contains a unique four-digit “Cash Out Code” that warns of crashes before they happen. It also pinpoints optimal entry points to potentially boost profits as high as 3,713%. To avoid the fallout, [click here]( to get the Cash Out Codes for each of your stocks — before they signal the next crash. Best of TradeSmith The chart below represents the best-performing open positions over the last two years, as recommended by our software. [Download now on the Apple Store]( [Get It On Google Play]( [866.385.2076](tel:+866-385-2076) | support@tradesmith.com ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith’s content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. 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