What is the current mood of investors? According to at least one indicator, the current sentiment among investors is fear.
According to the CNN Business Fear & Greed Index, the current sentiment of investors on Wall Street is fear. What is the CNN Fear & Greed Index? It’s a way to gauge stock market movements and whether stocks are fairly priced. The theory is based on the logic that excessive fear tends to drive down share prices, and too much greed tends to have the opposite effect. Based on current indicators, fear is driving prices down.
The war in Israel can be a contributing factor to investor fears as well as a host of other factors, including recession fears. Take, for example, the following headline:
“JPMorgan’s Marko Kolanovic braces for 20% market plunge, delivers recession warning.” -cnbc
According to Kolanovic, high interest rates are creating a breaking point for stocks – driving many investors to park their cash. “I’m not sure how we’re going to avoid it [recession] if we stay at this level of interest rates,” Kolanovic told CNBC.
The markets and investors are bracing for a downturn with many parking their cash. But, not all investors are parking their cash in the same way. While many investors are playing it safe and parking their money in traditional fixed income assets such as bonds and treasuries, the wealthy are taking a different approach.
Rather than having their cash be eroded by inflation in fixed income assets that fail to keep pace with rising prices, the wealthy like to stay ahead of the game.
How do the wealthy stay ahead of the game? They invest in demand and growth. Even in uncertain markets, there will always be assets with demand with room to grow. To see this dynamic at play, see how big institutional investors have been investing in the real estate market the past couple of years.
The median price of an American house has increased by 28 percent over the last two years, as pandemic-driven demand and long-term demographic changes send prices skyrocketing. Institutional investors may be partly to blame. The fact that corporate investors have snapped up 15 percent of U.S. homes for sale since 2021 has something to do with rising prices.
Institutional and corporate investors aren’t buying up every home they can. Their share would be a lot more than 15% if that were the case. Instead, they’re being selective. They’re focused on the stock of relatively inexpensive single-family homes built since the 1970s in growing metro areas. They ignore bigger and more expensive houses and they’re also ignoring cities with shrinking populations. Instead, they’re focused on growth. They scour the country to invest in locales with current or potentially strong job growth.
Institutional investors are snatching up the inventory of the exact types of houses younger, working and middle-class households will seek in cities where those workers can easily find good-paying jobs, like Atlanta, Charlotte and Phoenix. Leveraging their research skills and vast resources, they are able to analyze and anticipate growth in places before the workers even arrive. Whether they’re tracking where major employers are building new offices or looking at public school enrollment data, being ahead of the market has given these investors a distinct advantage.
What institutional investors may be looked down upon by housing advocates and workers looking for affordable homes, but there is a lesson to be learned from their investment strategy of following demand and growth.
The ultra-wealthy investors have long modeled their investment habits after institutional investors. Instead of speculating on stocks, they insulate their portfolios and wealth with cash-flowing assets. And in good times as well as bad, they invest in demand and growth.
Recently, the wealthy have started looking offshore for investment opportunities in high growth areas. With business going more and more international, smart investors are no longer restricted to domestic borders as they seek above-market gains offshore in growing locales.
Besides the diversification that offshore investing can offer, foreign assets can also offer significant tax as well as asset protection benefits. These benefits are even more appealing in a location where English is the official language with a stable government, a stable economy and that is friendly to foreign residents. That would explain the recent interest in Belize as a destination of investment interest for the wealthy to park their cash. I’m not surprised. I’ve been investing here for decades.
If you’re an investor seeking to invest in demand and growth, consider Belize – a foreign destination that checks all the boxes for generating diversified above-market returns insulated from uncertain markets and world events.