Where The Money Flows

“Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children’s children what it was once like in the United States where men were free.”  – Ronald Reagan


Real Estate vs. The Stock Market

There’s no secret that the real estate market is really hot right now with lower rates and limited supply. It’s a great time to be a home seller. Single-family homes had their biggest price increase on record in the first quarter of this year. What we want to do is compare real estate to the other main source of US homeowner wealth and that’s in the stock market. As you can see in the chart shown in this video, that going back to 1990 the Home Price Index has gone up a respectable 200%. That’s a big number but actually looks quite tame compared to the thousand percent return from the S&P 500 over that same time period which was about 30 years. While real estate does offer a way to diversify assets and create wealth, the stock market has been a better source of increasing US homeowner wealth over the past 30 years. For those that are wondering if you should have your money in real estate versus the market, based on history over the past 30 years, the stock market has created significantly more wealth for people than the real estate market.

Cash Flow

We got some fascinating information from one of our research partners, Strategas, about money flows and money markets. That’s what we look at as an indicator for investors having cash available to invest. We talk all the time about the stock market being a supply and demand indicator. If there’s more demand for risk assets, then prices will go higher. That demand comes from cash. Something that you can see in the chart shown in the video, is that going back to January of 2020 during the peak of the crisis, both institutional and retail investors flooded to cash to protect their assets. Since that time, both have decreased their cash holdings and put money in the market. That’s why we’ve seen this big rally in equity assets. However, starting at the beginning of this year, there’s been a big change in where you see the individual investor start to greatly reduce their cash holdings and participate in the continued rally in the market while institutional investors have gotten much more defensive. This is actually a good thing because the institutional part of the market is much larger than the retail investor. This gives us an opportunity since there’s more money on the sidelines that can be put to work to push prices higher. What we often see is retail investors are much more skittish and if we get a pullback in the market, it’s usually “the last money in, first money out”. So, the hot names, the high investments, really roll over and collapse on us really quickly. What ends up being there to pick up the pieces is a much larger institutional investment base with a lot of cash. If we see a rollover in the market, it’s likely a buying opportunity for institutional and individual investors that may want to follow the smart money. You can say that it’s not very smart if the money hasn’t been in the market this year, but we digress. The smart money, as it’s called on Wall Street, does have the cash to put to work and that’s a very positive point for continued potential rallies. There’s no guarantee that it’s definitely, always going to go up, but if there is a pullback, it’s good to see if there’s cash available to buy that pullback.


Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here


Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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