October 11, 2022
This morning the International Monetary Fund, IMF, released a report significantly cutting their growth forecast for next year, and warning “the worst is yet to come.”
For those investment advisors and investors who have been riding the past months decline in stock and bond prices, with the expectation that the Federal Reserve’s Quantitative Tightening (QT) program would reduce inflation without causing a recession, this might serve as a wake up call to reduce exposure to all markets.
The general consensus that based on the major declines in 2000 and 2008, the 12 year bull market, that Dips should be bought, because the markets will return to new record highs, is going to be tested in the coming months.
I continue to see the only safe place for investors is to have a substantial amount of a portfolio in short term U.S. Treasury Bills (3 month and 6 month) to ride out the storm. I would think that rallies should be used to reduce market exposure.
For those who can afford some risk taking, a small amount in highly speculative inverse Funds, which are designed to go up when markets go down. However, be very, very cautious with these type of funds because research has shown that they are not very efficient at achieving their goals.
I continue to believe that the implosion of the property sector in China will continue to be a major drag on Chinese equities and economies around the world.
However, the consensus of many professional advisors is that no one knows when the Fed, or the market will resume its positive momentum, so just stay with your current stocks if they have positive outlooks, and ride out this storm.
I don’t have a crystal ball, but the problems of too much debt throughout the corporate, household, and Government accounts tell me that strategy may not work this time.
As Warren Buffett has said, “You don’t know who is swimming naked, until the tide goes out.” To this observer the tide may be going out in China, England, and in the Cryptocurrencies.