There are as many opinions as there are economists speaking out regarding recession. Some say we are already in one with certain sectors of the economy; just ask anyone in the housing, mortgage and construction industries. Some think a recession is unavoidable... It is just a matter of which kind we will have. Is it going to be a mild one or one with a very hard landing? Only time will tell. In the meantime, the VIX or volatility index has risen above 24 which indicates more volatility is likely ahead in the immediate future. Inflation continues to be very stubborn and is not responding the way the Fed hoped it would despite the interest rate hikes they have levied on the economy. The Ukrainian war continues to wear on and an inverted yield curve, which in the past has usually signaled a recession at some point in the future, is keeping economists up at night.
The truth is, no one really knows when the sun will peak above the clouds signaling the dawn of a new opportunity with market gains and igniting a new era of FOMO (fear of missing out). All we know, if history is any indication, is that the market has always bounced back. The times we are experiencing now are not new. We have seen this same scenario play out 14 times since World War II.
All the above are in the bundle of economic and emotional factors we consider when making allocation changes to our own and your accounts. Many of our fund managers have been in a defensive position for some time. Today we are in the process of reallocating all our client portfolios to more conservative positions. We will sit this one out for a while until the economy gives us a thumbs up. There is still money to be made during conservative times. The money managers will find places where money can be made by investing in treasuries, cash, and some bond portfolios.
At Global View Capital, we do not have a crystal ball; nor does anyone else for that matter. We carefully follow an objective process designed to recognize changes in the economy in time to respond accordingly on behalf of our clients. Now is a time that requires such action. This lack of angst allows us to retain an unemotional strength, clarity of mind and readiness to act when action is warranted.
This quote by Warren Buffet, one of the greatest investors of all time, is extremely appropriate for the times we are living through currently.
“People often complain that the stock market is a rigged game. And so it is. It's rigged against the impatient – and in favor of those who can let their winners run. The longer you can let them run, the more rigged a game you get to play.”