Let’s discuss the current state of the stock market, why so much volatility, and what you might be able to expect for the future - enjoy! Add me on Instagram: GPStephan
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First, lets start here with the Federal Reserve suddenly reducing interest rates by half a point, out of nowhere. Now, this is REALLY GOOD if we start to see INFLATION. So, if they RAISE interest rates…debt become more expensive, and - in theory - the cost of goods should come down.
On the other hand, though…when the Federal Reserve is CONCERNED about the future of our economy, and wants to TRY to maintain stability…they’ll LOWER interest rates to reduce the cost of debt, encourage more people to borrow money, and encourage more investment within the markets.
When the FED posted a sudden rate cut of half a point, OUT OF NOWHERE…it signaled to the markets that maybe the economy is more fragile than we thought, and if the FED felt the need to reduce rates so quickly…maybe they know something we don’t. Hence the drop in stocks that day.
First, the most notable difference we’ll see is within our Savings Accounts:
When the FED reduces rates like this, it has a direct implication on how much you get paid in your Savings Account. So basically, in other words…savings accounts just aren’t as profitable.
Second…the other big change we’ll see coming…is actually really good news for real estate…mortgage interest rates are hitting all time lows.
From an interest rate standpoint…there has pretty much NEVER been a better time to buy real estate than right now. That’s because, the cheaper it is to borrow money, the less a property will cost you - which means, theoretically, you can buy MORE of it. This should, in turn, cause real estate prices to go up depending on the market…and, nearly everyone who has a loan right now, would be HIGHLY incentivized to refinance and lower their interest rate.
Third…overall…we’re not really sure how this will effect our economy, long term.
I mean, honestly…if I had the answer to this…I probably wouldn’t be sitting in my garage making YouTube videos on a Friday morning. Because, on the one hand…lower interest rates SHOULD help us out, it SHOULD raise the price of stocks, and it SHOULD allow us to borrow more money.
If you want to see past events and how they’ve impacted the stock market - here you go, as mentioned in the video:
https://books.google.com/books?id=wAblMinB3UMC&pg=PA77&lpg=PA77&dq=stock+market+performance+watergate+cuban+missile&source=bl&ots=lXZmz3h8HB&sig=ACfU3U3VBwAdXbACZVpE23FKsbV58xBNyg&hl=en&sa=X&ved=2ahUKEwiNrY3lxP7jAhWKLHwKHbhAD2U4ChDoATAAegQICRAB #v=onepage&q&f=false
In the event we DO see a recession, your NUMBER ONE priority - over everything else - is to stay employed, and keep making money.
Secondly, if you can cut back on your expenses, you’ll be in so much of a better position to take advantage of lower prices, and keep buying into the markets.
Third, I know I just recently said this…but I’m going to say it again: keep a safety fund of 3-6 months worth of your expenses on the sidelines.
Fourth, if you can’t handle this type of volatility without worrying…then, either don’t check the markets every day, or rebalance your portfolio so you don’t see such intense swings.
Fifth, if we DO enter a bear market…just understand, it’s not something that’s never happened before…. the markets NEVER just go up indefinitely, and you’ll need to do your best to hold out.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.