The Wall Street Thrill Ride
The last few weeks have been the worst kind of roller coaster for an investor with money in the stock market. Wall Street is seeing several factors influence trading and none of them are good. Debt crises are spreading across Europe, political dysfunction seems to be reaching new lows in Washington and the first ever downgrade of U.S. credit created what one analyst called “a perfect storm of selling.” The effects have been dramatic and painful. Nearly 2.1 trillion dollars of capital have vanished as the market has shed nearly 15% of its value in the last month.* There are a lot of words that could describe the stock market right now, and “perfect” is probably not the first choice for many investors.
Sadly, this market volatility is nothing new, but it has gotten to the point that market observers need to take Dramamine before the bell rings. While some asset classes will suffer through volatility to get great returns, the stock market can make no such claims. The Dow Jones is trading at the same levels it did in 1999. NASDAQ is doing no better and is at nearly 50% off all time highs that were reached 11 years ago. Looking at these numbers, the Wall Street mantra that the U.S. stock market is the best vehicle for equity growth fails under any level of scrutiny.
Surfing a Different Wave
Despite all the angst on Wall Street, it is important to remember there is usually more than one “perfect storm” and not all of these storms are bad. If you can see them coming, and ride the waves of opportunity these storms will produce, you could substantially change your path to wealth.
A Rising Demographic Tide
Let’s look at a different perfect storm – one that isn’t driven by a quarterly jobs report or the political game du jour in Washington. This storm is driven by the undeniable surge of Baby Boomers and Echo Boomers – collectively more than half of the entire U.S. Population. And, they are both moving into the two largest rental demographic ranges – 18 to 30 and 55 and over.
“While the homeowner market remains mired in foreclosures and weak demand, rental market conditions have improved. Indeed, renter household growth has outpaced owner household growth for four consecutive years. From 2006 to 2010, the number of renter households jumped by 692,000 annually on average, to 37 million, while the number of owner households fell on net by 201,000 annually. This is a complete reversal from the preceding decade and a half, when homeowners drove the vast majority of household growth and the number of renters stagnated.”
- The State of the Nation’s Housing 2011 , Joint Center for Housing Studies of Harvard University
A 20 Year Storm
The two largest U.S. demographic waves are crashing on the rental market, and will be doing so in increasing numbers for the next two decades. The effects of these waves will be dramatic and long lasting and any change in this trend will be easy to see from a long way off.
The answer then is obvious.
Get in front of and take advantage of these trends. It is a historic opportunity to develop permanent wealth.
“A perfect storm of selling” – Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.
* Statistics compiled after market close August 8, 2011.
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