The Dilemma of Choosing U.S. Assets Amid High Interest Rates

OilPrice Network, Nov 9 — High interest rates weaken the appeal of real estate investment, rate hikes may reach their limit, stocks and housing both hide uncertainties, while gold presents allocation opportunities.

Currently, one core variable of the U.S. economy is the interest rate. Persistently rising rates have already tangibly changed ordinary people's perceptions of assets.

Heightened Experience of High Rates: Americans Are Letting Go of Their Real Estate Investment Obsession

For a long time, buying a house has been seen as a hallmark of the "American Dream" by many Americans, with the default belief that homes are reliable assets for appreciation.

However, the impact of high interest rates is becoming increasingly acute, and the public is gradually shifting away from their dependence on real estate as an asset.

According to a survey by the National Association of Realtors, only 32% of recent home buyers believe that real estate is a better investment than stocks.

Compared to 52% in 2006, the gap is stark. The most direct cause of this shift is the continued rise in mortgage rates.

Currently, 30-year fixed mortgage rates have reached 7.18%, causing monthly payment pressures to rise sharply. The market no longer expects low rates to return soon, and institutions generally predict that over the next five to ten years, home prices are unlikely to see the rapid increases of the past.

In contrast, the S&P 500 continues to hit new highs, further widening the perceived investment gap between the two.

More and more people believe that taking on decades of high mortgage payments to buy a home may not yield better returns than investing in the stock market, though this does not necessarily mean the housing market will collapse.

Experts believe the market is merely squeezing out previous bubbles, returning to normalcy. Buying homes still has residential value, and self-occupancy demand will not disappear; it’s just that the investment attribute of real estate has obviously cooled in a high-interest rate environment.

Rate Hikes Reach a Bottleneck: Inflation Persists but Reasons for Further Tightening Dwindle

On one hand, inflation remains high, and the Federal Reserve needs rate hikes to curb prices; on the other, the path of rate hikes is reaching a bottleneck, with signs of diminishing returns.

The authority over interest rates mainly lies with the Fed, but the outcome of the midterms has altered the political environment surrounding the Fed.

After the Democratic Party took the Senate, it became significantly harder for the President to intervene in Fed personnel matters or pressure for interest rate cuts.

Fed Chair Powell has gained more leeway to maintain a tightening policy and bring inflation back to target levels; the Fed already completed a rate hike in September.

However, changes resulting from elections are not limited to personnel tussles; they also impact inflation through industry regulation.

AI data centers have been an important engine of U.S. corporate investment in recent years. These projects consume massive amounts of electricity and building materials, continually driving up demand for energy and infrastructure materials, hence supporting inflation.

After the Democratic Party gained power in several computing-heavy states, the market expects tighter regulation of data centers, which will slow construction.

Once AI infrastructure expansion cools, the demand for energy and building materials will weaken, easing upward pressure on prices.

This presents a paradox: with less political pressure, the Fed is bolder in raising rates; but the potential cooling on the industrial side reduces the need for continued rate hikes.

The market broadly expects the Fed to raise rates again in December.

But whether further tightening is necessary will depend on ongoing inflation and employment data.

The U.S. job market remains robust, supporting the case for rate hikes. If inflation gradually drops as industry cools, the pace of hikes will slow.

Both Stocks and Real Estate Are Under Pressure; Mainstream Assets Face Hidden Risks

At this moment, both stocks and real estate—the two mainstream assets—do not seem like particularly safe choices.

Real estate has lost its high-yield halo, high monthly payments lock in long-term cash flows, and the scope for price appreciation is limited.

This round of U.S. equity gains is highly linked to the AI trend, and whether it is sustainable will require future profit realization for confirmation.

Many seemingly low-PE companies rely on short-term capital expenditure and orders to drive earnings, lacking real sustainability, which can easily mislead investors.

Conclusion: Changing Landscape, Gold’s Allocation Value Becomes Apparent

Both narratives eventually circle back to the core hub of interest rates. The Fed’s ongoing tightening and higher borrowing costs are the root causes of fading real estate investment attractiveness;

Conversely, cooling real estate demand and slower AI infrastructure expansion suppress economic heat and inflation, limiting how far the Fed can continue to raise rates.

Ordinary people keep weighing between real estate and the stock market, while the Fed tests policies cautiously between controlling inflation and avoiding an economic slowdown.

In this scenario, both traditional main assets have clear shortcomings, making gold's safe-haven value worth reassessment.

As the room for further rate hikes narrows and the economy faces downward pressure, gold gradually begins to stand out for allocation value.

It does not depend on corporate profitability and, in a phase where rates peak and economic uncertainties rise, is a solid option for risk hedging.