The Bright Side of Weak Stocks

We are not saying that the stock market is not going to recover quickly from the correction it has undergone during the past several weeks. Nor are we rooting for stocks to languish this year. However, we always find that when there is bad news, there is most likely counter-balancing news somewhere else. In the case of a weak stock market, we have seen some of these effects.

For one, interest rates are lower than anyone expected at the start of this year. As we pointed out previously, the weak stock market has made many observers predict that the Federal Reserve Board will be more reticent to raise rates again any time soon. And this is not just because of the stock market, but the factors which are causing stocks to be weak, such as oil prices and weakness overseas.

Another sector which could benefit from under-performing stocks would be the real estate sector. If investors can't get returns in equities, they are going to look for returns in other sectors. Institutional investors helped prop-up real estate by purchasing massive amounts of foreclosures during the aftermath of the recession. Individual investors have returned to real estate slowly but surely, by purchasing homes and investment properties. Continued malaise in the stock market could hasten this process. 


Mike Ervin
NMLS # 282715
W.J. Bradley Mortgage
mike@mikeervin.com
www.mikeervin.com
(650) 451-7797
(650) 766-8500