I will start by saying that what I write here is my personal opinion and should not be taken as advice or instructions. I can not see the future or predict what will happen, this is only my opinion and it should be taken as such!
We all heard in the last few months that the real estate market in the US is high. Not only the real estate market is (was) high, also the stock market was breaking records every month for a very long time now. Many analysts predicted that we are very close to the turn of the cycle and we should expect the next recession shortly.
Many people (from the industry) I have talked to in the past year were saying that the real estate market is getting to a point where it is not making profits anymore (cash flow profits). They all agreed that the next recession will not have the same impact on the real estate market as the last one, which was driven by the subprime crisis and I agree with this statement. The next recession will also not be triggered by the real estate market.
Here are a few points to think about when analyzing the “crisis”:
- The COVID-19 came as a saviour to the governments. They can blame the coming recession on the virus and not their policy. This is especially true for Trump who is planning on getting re-elected this year. Recession is a very bad thing to have during an election year for the current president. But if the recession was driven by a “force major” like the COVID-19, it will not have such a great impact on the election results.
- The fact that the virus came from China and hit the Chinese economy so bad, could be an opportunity for the US (and other countries) to step into the void that is currently created in the manufacturing world.
- Cash was and will always be the king during a recession. The ones that have cash will be able to capitalize on the opportunities that will arise during this economic crisis.
To summarize, I don’t know if we are starting the next recession or not, it is too early to say. What I do know is that we will be monitoring the markets very closely in the next couple of months and will adapt our investment strategy based on the unfolding events.
Few points I would like you to consider:
- Don’t jump into any kind of investment at this moment, as you might regret you didn’t wait a couple of months
- Hold on to your cash, it might create your wealth in the next few years
- Please don’t follow the crowd if they are doing stupid things
- Leave some toilet paper to others – be considerate!!
Happy early spring,