October 2021 Market Update YTD: Real Estate, Farmland, & Gold
We are continuing to see growth in sectors beyond stocks, including real estate, farmland, and even gold showed slight growth over the past month. Similar to last month, many people are asking how high the stock market can go as well as how long the Fed can keep rates so low. While we don’t know the answer to either question, it seems that things could continue in the same direction, although talks of tapering have started to move some of the inflation hedging assets like gold and nearly every other commodity that’s tradable. If you’ve been to the supermarket or the gas station it seems that inflation is already here, but neither gold or silver has been allowed to rise notably.
Real Estate: 32%
It seems that many large and small corporations alike are allowing remote work/hybrid remote work indefinitely after going through the quarantine season. That being said, real estate prices continue to rise both residentially and commercially. Real estate developers and experts see commercial properties as an opportunity to repurpose as residential apartments, for the right price. This could be an upcoming trend as the need for commercial space is reduced and the need for residential housing increases.
Along with nearly all other commodities, farmland continued to show tremendous growth YTD. The only difference is that farmland continues to throw off yield while appreciating in value. As stated in other articles, the amount of food needed in our country (and around the world for that matter) increases while the amount of farmable land decreases year over year. As this need continues to grow the value of available farmland would logically continue to increase as well.
This month, gold has been gaining back some of its year to date losses, but still not back to its June high. Gold has not been popular with all time stock market highs, but that is typically a good time to hedge your portfolio, before the masses see a need to do the same and ultimately run the price up. Interestingly enough, we have seen a number of countries add large additions to their gold reserves recently, including both China and Russia, as well as Ireland (who hadn’t added gold to their central bank reserves since 2008).
Of particular interest, when it comes to gold and other precious metals, are the royalty and streaming companies. They offer the exposure to the precious metals, less volatility than mining stocks for the most part, and tremendous market capitalization to employee ratio. When you look at an equal weighted index of the 5 largest precious metals royalty and streaming companies, they grew by 44% in 2019, over 16% in 2020, but are down around 8% YTD.
Stock Market: 23%
Big moves by big companies lately have pushed the S&P500 weighting even more top heavy with the top 10 stocks making up around 30% of the entire S&P500. Facebook announced a move into the meta verse while Tesla got a large order from Hertz that pushed the stocks even higher. Bulls say that the market will continue to rise, raising all ships like small and mid cap stocks, while bears are shouting even louder that there is a market correction coming soon. It’s hard to say definitively but it is hard to argue the gains that have been made for all who participated in the market rise.
If you are invested in the stock market, should you take your gains and get on the sidelines or should you ride it out hoping for continued success? One of the best strategies for taking gains while also investing in buying opportunities is a tactical rebalance of your portfolio. This allows you to sell certain assets high while buying others low, (buy low, sell high) following the advice of investing greats including Warren Buffet. If you do this on a quarterly basis (or even monthly if you want to get more granular), it takes the guess work out of anticipating which investments have peaked at their high or hit their bottom. If you need help deploying this strategy or have general questions, don’t hesitate to reach out today!