As we venture into the New Year, we’re certain to see some changes. And if today’s stock market opening is any indicator, it could be a rough ride on Wall Street. The first trading day of the year saw the Dow slip by more than 450 points, the worst opening since 1932. That’s right. 1932. On the other hand, the bright spot appears to be in real estate. The most recent S&P/Case-Shiller home value index reported home values for the most recent data actually rose by 5.2% in October, the most recent month available. This is on the heels of September’s 4.9% gain. If your portfolio is stocked with real estate, you’re pretty happy right about now.

Let’s take a little closer look at the numbers. In a story released today on* it highlighted the fact the S&P 500 turned negative for the year, with most of the losses coming toward the second half of 2015 and it appears this negative momentum is carrying into 2016. And, according to the article, nearly every asset class in 2015 failed to produce any returns for investors. The article goes even further and predicts stocks will fall by -20% this year. While every market has its bear with a mouthpiece, the article further predicts Treasuries will benefit and there will be no Fed Funds rate increase at least until the second half of 2016, if at all.

If equities do stumble, this should bode well for real estate. As home prices rise and stocks pull back, rental rates should continue to rise. Real estate investors should then see an increase in the value of their portfolio as well as an increase in cash flow. Financing costs should also remain low and could perhaps fall another 0.125 – 0.250 percent, this in spite of the recent Fed Funds rate bump as mortgage bond holders drive up demand for these securities, lowering the yield. Steady as she goes for real estate, not so much for stocks.

*Michael Pento, January 4, 2016