I agree with Chris. To talk about a recession as a foregone conclusion is not consistent with the views of many economists. Most recessions are preceded by RE drops, but recessions are not foregone conclusions after an RE drop. Keep in mind that during other RE drops, RE was at least fairly connected with underlying fundamentals. As we’ve all pointed out repeatedly, it is currently completely detached from any fundamentals whatsoever. This means RE’s current drop is not a reflection of some other poorly performing aspect of our economy. In essence, most here seem to perceive that RE is causal, where as I view it as effectual. It’s detached from fundamentals and it’s losing steam. So what? Now I know where not to put my money. And so does everyone else.
By removing oneself completely from the stock market, history tells us you are realizing about half the annualized gain you would make in a well managed value fund or Russell Value Index Fund. My favorite value fund has returned 2% in the last 10 days. 40% of my assets are in stocks. Come December, I bet ‘ll wish it was much more.
If a company misses earnings, it’s stock will go up if there is still a greater demand to buy its stock than there is to sell it. When companies miss earnings, the stock typically goes down, because institutional investors sell off portions of there holdings and put it into a company that did meet expectations. The net effect on the market is a wash. After the NASDAQ crash, when the market collectively decided to correct the P/E ratios awarded to tech companies, people gave up on stocks and went to residential RE. Now they’re going to give up on RE, putting upward pressure on other places to make money.