With all the recent headlines surrounding the current state of the market and increased volatility, we are taking a deeper dive into key factors that we believe investors should keep an eye on, such as:
Stock Market Volatility Persists – Global equities remain locked in a highly volatile patch, with broad-based selling pressure being applied to risk assets across the board last week. Investors will continue to face challenges from here, but our message to readers is to remain calm and patient. Relative to forward 12-month earnings estimates, stocks are now largely trading at deep discounts from where they started in 2022. Multiples are lower, which is another way of saying that stocks have become relatively cheap as a result of the selloff. That makes now a bad time to sell, in our view. The next few weeks could remain challenging for investors – historically, volatility surrounding corrections can span months, which makes focusing on the long-term harder and harder as the ups-and-downs persist. But this is how corrections have always worked. Since 1980, the S&P 500 has experienced an average intra-year decline of -14%, and almost all of them rattled investors to the core. Patience has paid off historically—the market finished positive for the year 76% of the time.1
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Are Your Investments Protected if the Economy Enters a Recession?
High volatility is causing many investors to question their investments. Investors are wondering if they should sell now and exit the market in case there’s a potential recession?
When preparing for a potential recession, it’s important to understand the following –
Get the answers to these questions and more with our free guide, A Recession is Coming: 6 Insights to Know You’re Prepared2.
If you have $500,000 or more to invest, get our free guide today. You’ll learn the scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather a potential one. Don’t wait—get this guide today!
Download Your Copy Today: A Recession is Coming: 6 Insights to Know You’re Prepared2
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Lockdowns in China Threaten Global Economic Outlook – Many of the news headlines today cite continued worries over inflation, rising interest rates, and Federal Reserve policy as the primary drivers of stock market volatility. But in our view, these factors are already baked into stock prices. Recycled news stories largely do not have pricing power overstocks, but overlooked stories do. That’s where China lockdowns come in. The world’s second-largest economy accounted for 18.1% of global GDP in 2021, and it is responsible for nearly one-third of global manufacturing output. A zero-tolerance Covid-19 policy is putting its economy in jeopardy. Lockdowns in manufacturing hubs like Jilin province and major cities like Shenzhen and Shanghai have shuttered factories and stores and resulted in a drastic decline in exports. China’s exports rose 3.9% in April year-over-year, a sharp fall from the 14.7% growth rate posted a month earlier. The unanswered question is how long these lockdowns may persist and how far China will go to stamp out Covid-19, and it may be this uncertainty that is driving consternation in global equities.3
Rising Interest Rates Start to Impact the Mortgage Market – Interest rates have been moving sharply higher in 2022, and mortgage rates have been following. Many mortgage originations at the beginning of the year saw rates in the 3% range, but that number has now soared past 5%. This move has impacted the level of new mortgage originations. According to the Federal Reserve Bank of New York, lenders issued approximately $859 billion in mortgages in Q1, which marks a 25% decline from 2021. This decline in mortgage origination does not necessarily have any implications for the housing market, however. Much of the drop-off marks a decline in refinancing applications since homeowners no longer have access to 2021’s historically attractive rates. The housing market is also still benefiting from an inventory shortage relative to the number of buyers, which should support prices throughout 2022.4
The U.S. Consumer’s Transition to Spending on Services Faces Familiar Headwind – In 2020 and 2021 U.S. consumers spent more money on goods than services, as a result of pandemic restrictions that kept many close to home. 2022 was supposed to flip this trend, with many Americans eager to get out and travel. Inflation may throw a wrench in these plans – gas prices are up 50% from a year ago, hotel costs are up 30%, airfares jumped 24%, and rental car prices continue to climb. These price pressures are causing many Americans to delay or cancel travel plans for the summer – a survey by Bankrate in late March found that 70% of respondents said they would be adjusting summer travel plans as a result of inflation.5
Is a Potential Recession Around the Corner?
Many investors are concerned about how to invest during a potential recession. Especially if you’re at or near retirement, a recession may require pivoting your retirement investing strategy.
To do this, it’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide, A Recession is Coming: 6 Insights to Know You’re Prepared6.
If you have $500,000 or more to invest, get our free guide today. You’ll learn the scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather a potential one. Don’t wait—get this guide today!
Disclosure