The recession has become the talk of the town again in the U.S. economy and financial markets, with many leading downturn indicators flashing red.
In March, The Conference Board’s Leading Economic Index slumped to its lowest level since November 2020, declining by 1.2 percent and deepening into contraction territory.
The spread between the two- and 10-year Treasury yields, which has forecast nearly every recession since the Second World War, settled the April 20 trading session at negative 60 basis points. The gap has widened since July 2022. The Federal Reserve’s preferred recession measurement—the three-month and 10-year yields—finished the session at negative 158 basis points.
Minutes from the Federal Reserve’s Federal Open Market Committee (FOMC) policy meeting in March revealed that central bank economists expect a recession later this year as the fallout from the banking turmoil spreads throughout the national economy.
Other economists and market experts agree. A recent Marquee QuickPoll for Goldman Sachs, for example, revealed that 53 percent of investors expect a recession this year.
“I believe that a near-term recession is more likely than unlikely. It will be very difficult for the Fed to engineer a soft landing for the economy and still win the battle to stem inflation,” Robert R. Johnson, a professor of finance at Creighton University’s Heider College of Business, told The Epoch Times. “The problem with recessions is that we don’t know we have entered one until after the fact, and we also don’t know we have exited one until after the fact.”
But for many Americans, the recession might already be here.
According to the CNBC All-America Economic Survey, 66 percent of Americans think the United States is headed for a recession or is already in one. Moreover, a January Morning Consult study found that 46 percent of U.S. adults believe the nation is entrenched in a recession.
How should investors prepare for this environment if a recession is on the horizon or has arrived?
Navigating the Markets
Despite bank failures, credit contraction, and tightening lending standards that might slow the economy, this “does not mean you can’t make money in stocks,” according to Nancy Tengler, the CEO and CIO of Laffer Tengler Investments, in a note.
Johnson thinks recessions could be an opportunity to enter the market or build on existing positions “as stocks are selling at prices below previous highs.”
What exactly should you be looking for in today’s climate? According to Ben Fraser, the CIO of Aspen Funds, it is paramount for investors to possess “diversification” in their portfolios.
“Having diversification across multiple investment asset classes and strategies will soften the impact of a recession,” Fraser explained to The Epoch Times.
Michael Collins, the founder and CEO of WinCap Financial and professor at Endicott College in Massachusetts, shares this recommendation about diversification. He told The Epoch Times that investors need to concentrate on “diversified, long-term investments and seek out deflation-resistant, stable investments.”
“This should include investments in blue-chip stocks, bonds, and low-risk mutual funds,” he said. “Adding gold and other precious metals can also be beneficial as a hedge against inflation and market declines.”
Investment diversity has been the go-to recommendation for many financial experts, but the limited research on this subject suggests that only a third of investors ensure their investments are diversified.
At the same time, not everyone is in lockstep with diversification, including billionaire investor Warren Buffett, who asserted that the strategy “makes very little sense for anyone that knows what they’re doing.”
“It is a protection against ignorance,” Buffett said.
Investors can also shift their investment portfolios to defensive sectors “that are less affected by slowing economies,” says Richard Gardner, the CEO of financial technology firm Modulus. This includes health care, consumer staples, and utilities.
It could also be a perfect time to “investigate the financials of your investments,” Gardner told The Epoch Times.
“Stick with companies that have the balance sheet and cash reserves to make it through the storm and come out the other side,” he noted. “This is particularly valuable when taking a long-term approach to investing.”
With governments worldwide investing significant taxpayer dollars in the green energy industry, even as economies might be heading into a recession, Tengler thinks this could be an exceptional trading opportunity.
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Tengler has picked potential investment options for green tech, metal, miners, and hydrogen.
“We also like the clean-energy commodities and have recently added to some of those names as well as energy yesterday and continue to add to consumer discretionary,” she stated. “Focus on reliable earners with great, seasoned management teams.”
Bonds and Gold
The global bond market has been volatile over the last 18 months, whether in the U.S. Treasury arena or the U.K. gilts. Heading into 2023, the Barclays Global Aggregate Bond Index—a benchmark of about $70 trillion of sovereign and corporate debt—had tumbled nearly 5 percent since 2021. But many of these indexes have rebounded so far this year, such as the Vanguard Total Bond Market ETF (3.2 percent), iShares Core U.S. Aggregate Bond ETF (3.2 percent), and SPDR Portfolio Aggregate Bond ETF (3 percent).
For years, standard investment advice has been to invest in bonds during a recession since these instruments offer regular cash flow, a predictable fixed income, and a reduced chance of losing your principal. Long-term bonds have been a reliable pick during five of the deepest recessions in the last century, says John Rekenthaler, a member of Morningstar’s investment research department.
“Through each of the five deepest recessions during the past 100 years—two of these have occurred within the past 20 years, so this is not just ancient history—long government bonds not only turned a profit but also outdid Treasury bills,” he wrote in a report. “On four out of those five occasions, equities crashed. Long Treasurys have therefore offered strong protection against stock market declines caused by economic weakness.”
In addition, it is worth noting that interest earned from Treasurys and money markets are not subjected to state and local taxes, although they face federal levies. By comparison, a certificate of deposit (CD) offers higher rates but will be slapped with federal and state income taxes.
For the broader economy, Morningstar analyst Sandy Ward recently stated that the bond market is flashing red, signaling recession, rising credit stress, and weakening economic conditions.
Gold is another safe-haven asset put forward by financial experts.
The yellow metal has trended higher since November on a weaker greenback and the Federal Reserve’s easing monetary policy prospects. Year to date, gold prices are up nearly 10 percent and recently flirted with the August 2020 record high of $2,069.40.
Gold is typically sensitive to interest-rate movements because they can affect the opportunity cost of holding non-yielding bullion. The buck’s performance can make dollar-denominated commodities more expensive or cheaper for foreign investors.
The other factor has been weakening economic data, says Stephen Akin, a registered investment advisor at Akin Investments.
“The primary fundamental event that propelled gold well above $2,000 was weaker U.S. economic data,” he told The Epoch Times. “This data suggest that the Federal Reserve could certainly consider slower rate hikes and a pause of rate hikes sooner.”
Collin Plume, the CEO of Noble Gold Investments, would not be “surprised if 2023 saw a new record high for gold prices” as the global economy “teeters on the edge of recession.”
Emerging Markets
Some experts believe it would be advantageous to consider emerging markets, such as Brazil, China, and India—with or without a recession.
This could be a prudent step, considering that the International Monetary Fund (IMF) forecasts that emerging markets and developing economies will expand by 3.9 in 2023 and 4.2 percent in 2024.
“If we avoid a recession, it may be worthwhile for investors to look more closely at emerging markets which often can provide higher returns but assume a greater risk,” Gardner stated.
Stocks with “upside potential” should be assessed as options for a recession-era investment strategies, including riskier assets.
“This could include investing in riskier assets such as small-cap stocks, venture capital, and commodities,” Collins said. “Investors should also consider adding international investments to their portfolios and investing in sectors that are expected to grow in the long-term, such as technology and healthcare.”
According to Emily Leveille, the portfolio manager and managing director at Thornburg, traders should reconsider international equities, purporting in a note that valuations are generally lower than in the United States.
“Over the past 10 years, foreign markets have traded at a discount to the U.S. that has widened since COVID,” Leveille wrote in a research note last month. “If the U.S. market indeed falls into recession this year, and equity prices contract further, the ex-post valuation disparity will have shown itself to be even wider.”
A peaking U.S. dollar, lower energy prices, and China’s economic reopening would be other reasons to incorporate emerging markets into portfolios.
Where Is the Market Headed?
Despite everything that has transpired in the first few months of the year—from higher interest rates to banking turmoi—the leading benchmark indexes have held steady.
Year to date, the Dow Jones Industrial Average is up 2 percent, the Nasdaq Composite Index has rallied more than 15 percent, and the S&P 500 Index has surged nearly 8 percent. So, where does Wall Street think the market is headed for the rest of the year?
The present risks to the equities arena are earnings cuts and valuation adjustments. Monetary policy could also affect the direction of stocks. Investors are penciling in one more rate hike at the May FOMC policy meeting and planning for rate cuts later this year and heading into 2024 in response to slowing economic conditions, according to the CME FedWatch Tool.
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A February 2023 Reuters poll found that strategists expect the S&P 500 will finish the year at 4,200. The index has been trading at around 4,100.
But while industry observers are always on the hunt for trends, the rest of the year may be a time for the stock market to be stuck in “limbo,” says Jurrien Timmer, the director of the global macro in Fidelity’s Global Asset Allocation Division.
“Indeed, the cycle seems to be meandering without a clear inflection,” he wrote, adding that fund flows are displaying “neither hope nor despair.”
“A period of ongoing base-building may lie ahead for the market,” he said. “For investors, the key for now is patience.”
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Article cross-posted from our premium news partners at The Epoch Times.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
