We certainly hope that stock-market investors don’t sell in May and then go away. A deep decline in stock prices could be a negative for us because it would mean a reduction in accumulated wealth.

The less wealthy you feel, the poorer you feel. This appears obvious, but when people feel less wealthy they tend to dig in and spend less. The first items they target for spending cuts are the big-ticket items – automobiles and homes. (People frequently label homes as investments, but that’s not true. A housing investment generates cash flow through either rent or a flip. An owner occupied house is an asset, but not an investment. It is a consumption purchase.)

When the stock market sold off hard in 2000 and 2008, we saw a marked decrease in home sales and lending activity. Potential home buyers felt less wealthy, and the big-ticket items were the first items to be deleted from the “buy” list.

The good news is that housing returned with a vengeance (even despite the price depreciation that occurred in 2007 through 2009). Many investors turned to homes as a store of value and source of cash flow instead of stocks.

That said, the stock market has been teetering on wobbly legs of late. Let’s hope it regains its strength.   Should stock prices tumble, you can be sure that the repercussions will be felt in our neck of the woods.  That, we can do without.

Information provided by Jessica Regan.

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