economy
STOCK MARKETS: MORE VOLATILE THAN MY 6-YEAR-OLD SON Uncertainty in global equities markets over the past year has increased the attractiveness of other assets, real estate included.
Global stock markets have been on a wild ride since the pandemic hit. After reaching all-time highs early in 2020, stocks plummeted as the economic ramifications of social distancing in response to the arrival of Covid-19 became apparent. No index was immune, with the likes of the S&P 500, Dow Jones, NASDAQ, and Toronto Stock Exchange (TSX) falling by almost 40% over the course of one month. The recovery was not as swift as the decline, but stocks generally re-achieved their pre- Covid-19 highs by the end of 2020, with the NASDAQ doing so in June, the S&P 500 in August, the Dow in October, and the TSX at the end of December. By the end of February 2021, a dollar invested in these indexes one year earlier would have returned between 1% (the TSX) and 30% (the NASDAQ ), meaning that any index-mirroring nest eggs that were held through the worst of the pandemic at worst retained their value and at best provided a tidy return. This short-term volatility but long-term retention of value has likely had two
reinforcing effects on real estate markets generally. First, the degree to which the value of stock indexes and their underlying equities are susceptible to sudden and dramatic downside changes in value was highlighted by the arrival of the pandemic; to the extent that older, long-term investors are relatively more risk-averse, this could have the effect of pushing capital into hard assets such as real estate—either for themselves or, in some case, for the purposes of helping their children access home ownership. Second, the fact that stock values recovered their early-2020 losses meant that household savings tied up in the equities market were still available to be redeployed (again, real estate being one possible vehicle). This stock/real estate market dynamic, to the extent that the above captures it, will not continue in perpetuity. However, the residential real estate market within an economy punctuated by volatile stock markets and low-yielding bonds certainly represents an opportunity.
12
rennie.com
Made with FlippingBook - professional solution for displaying marketing and sales documents online