There's scary complacency about stocks and home prices. What it means investors.

By Brett Arends

A majority of Americans think the best investments right now are real estate and stocks

U.S. home prices are at record highs. They have doubled in 10 years and are now far, far higher than they were even at the peak of the infamous housing bubble of the mid-2000s. When compared with average U.S. incomes, they are back at the crazy levels of 2006.

See the following chart, based on U.S. government data. The analysis came from New Jersey-based Mindful Advisory.

Meanwhile, U.S. stocks are also at record highs, and at lofty valuations based on a variety of longstanding metrics.

So, it is both predictable and alarming to read that, according to a fresh poll, a majority of Americans think the best investments right now are ... real estate and stocks.

In total, 56% of the public ranked real estate or stocks at No. 1 in the latest annual Gallup survey on the subject.

Meanwhile sentiment toward bonds was near record lows. Just 4% like them. The poll was conducted early last month.

These things swing in and out fashion, based more on what has happened recently than on what is likely to happen next. Psychologists call this "recency bias," because our brains are hardwired to give undue importance to things that have happened recently.

Skeptics on Wall Street call it "driving while looking in the rear view mirror." It doesn't guarantee you will crash as you drive down the money highway, but it sure makes it more likely.

Gallup data show that real estate and stocks were both heavily out of fashion with the investing public back in 2011, in the wake of the global financial crisis. That was, of course, just when everyone should have been buying homes and stocks.

What was the most popular investment back then? According to the Gallup poll at the time it was gold. And why not?, the public must have thought. Gold had rocketed over the previous decade from a low of around $260 an ounce to a peak of nearly $2,000. It must be a great investment, right?

Cue laughter. Naturally that proved to be the peak of a boom. The price of the metal then collapsed, falling by nearly 50% over the next few years.

As some snarky scribbler pointed out at the time, you could tell gold was at a peak in the summer of 2011 because of who was pumping it in public.

But gold's popularity with the investing public bottomed out around 2019, which of course turned out to be just when people should have been buying it. Since then it's doubled.

You can't set your watch by these things, but one thing is certain: The best time to invest in something is not after it's doubled or tripled in price, and the public are telling Gallup it's a sure thing.

-Brett Arends

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-15-24 1357ET

Copyright (c) 2024 Dow Jones & Company, Inc.