Wall Street Indexes dropped yesterday on disappointing
earnings as oil and food prices push up inflation.
The Producer Price Index May report showed inflation
hitting manufacturer’s costs and chipping away at their
future earnings potential. This PPI index is one of the core
numbers that Fed watches closely and can be a primary
influence in decisions by the Fed regarding interest rates.
However most financial analysts and economists agree
that the readings so far do not indicate that the Fed will
raise rates at its meeting next week. Inflation readings will
be the numbers to watch in weeks to come.
It’s good to remember that daily stock market movement
is, above all, an indicator of current investor sentiment.
Much of the daily stock and bond trading numbers you
hear on the news are due to short term earning projections,
not long term. One reason that real estate remains a
strong investment is that it is a tangible asset that can be
counted on to gain value over time. Sure we’re experiencing
a serious downturn right now… but 1-3 years from now
this trend will most likely reverse again, just as it has in
the past. The beauty of real estate as an investment is that
you are using someone else’s money (the lender’s) to earn
money (appreciation) and getting a hefty tax write off (for
mortgage interest) in the process. Stock investments can
never offer this!
What does this mean for you? It’s a good time to remind
clients to stay focused on their long term goals. Basic
investment strategy dictates that the time to buy is when
market values are low… so it makes a lot of sense to buy a
home right now (if they don’t already own) and reap great
earnings in the next 10 years. There are many great investment
strategies that include real estate and this is where
you can shine and gain more business too. Most people
do not have anyone who reviews their entire investment
strategy from a real estate expert’s perspective. By broadening
your focus to include your client’s entire scope of
wealth planning, you can help them tremendously. I encourage
you to widen your focus to include more than the
one property your clients may be focused on, and to show
them how to make money through multiple real estate
investments. If you’d like more in-depth tips about how to
do this just give me a call. I’ll be happy to help you.