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What if We are NOT in a Recession?
A short note today, but everyone is assuming that the obvious is (or will be) reality.
Like: We are in a recession. Growth is slowing. Inflation is through the roof and not coming down. The Fed will keep hiking. Job losses will come. Spending will slow. Etc., etc., etc.
But what if any of those things turn out not to be the case?
What if we are not yet in a recession?
We all know that GDP reports get adjusted for YEARS after they are first reported.
What if business investment stays strong?
What if we see slower losses in retail sales (goods) than expected?
What if spending on services remains solid or even grows?
What if home building slows less than expected?
What if the government purchases more goods and services than expected?
What if we export more than expected? Or we import less than expected?
What if inventory build is different than expected?
What if the current inflation reports are overestimating the real inflation?
Owner Equivalent Rent (OER) is a huge component of inflation, yet the data lags by 8 months. In other words, the inflation level today is reflective of where housing prices were in February with the 30-year mortgage rate now hovering around 7%, does anyone really think the prices today are reflective of February?
To be clear, I’m not suggesting that we are or are not in a recession. I’m not suggesting that inflation is not high.
I’m suggesting that there is a chance that everything being suggested is not a foregone conclusion.
I’m suggesting that what may seem obvious now could in fact turn out to wrong or some version of “less right.”
Embedded in my suggestion is the suggestion that you won’t know until you know. And I’m implicitly suggesting that when you do know, you’ll say some version of, “Man I shoulda [insert XYZ].”
And I’m explicitly suggesting you can only guess.
The stock market is defeated only when defined by a certain period of time.
Remove the context of time and it’s undefeated.
Know what the money is for and when it’s needed. If you don’t need the money now, (or within say 18-24 months as an example) build and hold the portfolio you want to have in a recovery rather than build the portfolio you wish you had back in January.
Because what if some of the things you think are absolute actually turn out to be wrong?
Ask yourself what you think will happen to the market if GDP is revised upward. Or Inflation comes down way faster than thought as the monetary stimulus bleeds off? Or, suddenly, the Fed backs off its current plan?
Surprises to common thoughts and assumptions will materialize, so be in the right portfolio FOR YOU and make yourself financially unbreakable with a solid cash strategy.
Keep looking forward.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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