The Stock Market seems in a really erratic place right now, and I would think riskier than real estate in terms of securing your capital. We've had a good bounce back, but with the 33% decline in GDP shown above, how long can it hold out I don't know.
I think that 33% in annualised. Maybe @Deepdiver
knows. So for 2020 so far that is about 10% decline in total; and you have to remember the government has borrowed about 15% of GDP for stimulus.
The numbers out of Europe are about 10% for this quarter. I assume that is not annualised and so Europe is probably more like 12.5% so far this year. We could be looking at 15-20% overall.
What are people's thought's about withdrawling part of one's 401-K at this time of economic crisis this summer to payoff one's house?
I don't know about US retirement funds, but as per the GDP number above, we are looking at a double recession, or depression. The 2008 crash took about 7% off GDP. This time we are looking at 15%. I saw economists predicting roughly that figure earlier in the year.
If it was not for stimulus, I think stocks would be down over 50% right now. The powers that be have held them at close to record highs with 15% of GDP in borrowed stimulus and more to come. I thought The US would hit about 150% debt to GDP in the window 2027-2030, but it looks like that could be hit next year, especially when you consider GDP is going to be down about 15% this year.
My take is that their propping this up can only last so long? They can't borrow 30% of GDP every year. And as such I have and would sell all stocks. I have only kept hold of gold/silver mining stocks. Right now the market is near all-time highs, with the most insane EPS ratios ever, against a backdrop of the worst economic numbers in living memory.
As for the mortgage. My guess is that the market will take a huge hit, even outside of the cities and I don't think it will recover to these bubblish levels.
With that said you've got the mortgage at a fixed price, so it ain't moving. My take is your stocks will be worth a lot less this time next year, while your mortgage principle would be the same. So if I was you I'd be looking at one of two routes:
1) take it out of stocks and pay off the mortgage
2) take it out of stocks and sit in it in cash, and maybe some genuinely HQ bonds, then reinvest it when markets are down at least 50%
The caveat to this is it is likely The Fed and other central banks are going to start buying stocks to prop them up. Japan has been doing this for about ten years and their central bank now owns 8% of equities and half of government debt. The UK central bank also holds a large amount of UK gilts. I assume The Fed already has a hand in that pie.
As a result it is debatable how much markets will crash when the debt avalanche inevitably begins.
Personally, I am losing interest in developed markets because we are looking at so much manipulation holding prices way above where the market would set them.
Another possibility is that after the crash there could be several years of decline/stagnation in stocks.
Of the three options:
1) hold your stocks <- I feel this is the most risky
2) pay off your mortgage <- I feel this is the safest bet
3) sell now and try and buy back, moderate risk, highest return