US Stock markets and real estate markets
Over the past several years, US stock and real estate markets have experienced unprecedented growth. Despite warnings from experts all across the world, these markets have continued to thrive, and in some cases, reach new all-time highs. As summer of 2023 approaches, however, the signs are increasingly indicating that US stock and real estate markets are hugely overvalued and will collapse in the not-so-distant future.
The primary cause behind the extremely elevated values in US stock and real estate markets is easy money. Governments have kept the money supply abundant in order to stimulate their respective economies, and this is especially true in the United States. Easy money has led to credit becoming increasingly more available, which in turn, leads to people buying investments that may not be sound fundamentally. As a result, the prices of stocks and real estate have gone up significantly, without any real backing from intrinsic value, but instead relying solely on speculative factors.
The extreme amount of money in circulation also aids in tugging US stock and real estate upwards even further. As the money supply increases, so does the demand for synthetic securities, such as stock and other debt instruments. This can drive prices for these assets to new heights, leading to an unfair sense of confidence being legendary among investors and consumers alike. Eventually, this bubble will have to pop, due to unsustainable pricing in comparison to what the underlying asset is actually worth.
Furthermore, the vast amount of money being placed in the stock market is accompanying with a lessening of disposable income amongst consumers. The desire to spend money on larger items such as cars or houses is quickly being replaced with speculation around US stocks. This further contributes to the unrealistic evaluation of both stock prices and physical real estate assets, creating yet another inflatable bubble. This inevitably leads to a decrease in the amount of actual buyers of housing, and thus, an even more exaggerated pricing bubble is created within this too.
The other contributing factor to the current state of the US stock and real estate markets is the recent influx of speculative capital coming from institutional investors. As stated earlier, the increased money supply creates an environment in which surplus of artificial liquidity fuels investments that are otherwise far from optimal. Thus, the entry of new institutional investors has stoked the flames of potential growth for these markets due to the availability of seemingly free money. This has facilitated a runaway train of movement as people pile into artificial securities without consideration for the underlying value of what they are investing in.
All in all, the exorbitant price levels of US stock markets and real estate markets in the summer of 2023 are unsustainable and soon to come crashing down. This is a direct result of the easy money that is driving up prices on artificial securities from investors that have no appreciation or concept of the underlying asset’s value. What ensues these price booms is a narrative of necessity and return on the investment that is far too optimistic to actually come to fruition. Sooner or later, likely before Summer of 2023 is up, an adjustment is in store for US stock and real estate markets.