Can Your Portfolio Weather an Economic Storm?


Let’s talk a little about famous last words. On Nov. 8, 2007, then-Federal Reserve Chairman Ben Bernanke told lawmakers that the U.S. economy did not appear headed for recession. One month later, the Great Recession of the 21st century began.1


So, on Sept. 6 of this year, when Fed Chair Jerome Powell announced that he didn’t “at all” expect the U.S. to enter a recession, it makes you wonder.2 The reality is that even the most experienced economists don’t always make accurate predictions.


Economic growth rises and declines just like market volatility, inflation, and interest rates. It’s difficult for anyone to predict these things with any accuracy because the economy is cyclical and moves on its own timeframe. The ups drive growth, and the downs spur companies and the government to make effective decisions that will eventually drive up growth again.


When it comes to investment planning, you should plan on ups and downs. It can keep you up at night if your portfolio is reliant on day-to-day market moves and economic cycles. If you have long-term goals, it’s best to align your investment allocation to help you reach those goals and try not to worry too much about temporary declines.

That said, if you’re concerned that your financial strategy or investment portfolio might be vulnerable to a possible economic recession, talk to us. We have some ideas to help you weather the storm.


And speaking of a possible economic storm, it’s a lot like watching predictions of those named weather events that form in the Atlantic Ocean. One day it’s a tropical storm, the next day it’s a hurricane — it’s fast moving; then it’s stalled. There’s just no predicting its next move. But we can pick up on the signals, much as we watch for signs of a recession. And lately, there have been a few.


For example, the Trump administration’s ongoing trade war with China is causing problems for U.S. manufacturers, farmers and even consumers. Moody’s Analytics reports that the U.S. has lost approximately 300,000 jobs and 0.3% in GDP since the trade war began. If trade escalations continue, the firm predicts the nation could lose up to 800,000 jobs and the economy could plunge into a recession.3


The economic effects don’t end there. Because China and the U.S. are the world’s top two economies, the trade war is affecting other countries, as well. The Organisation for Economic Co-operation and Development (OECD) reduced this year’s forecast for global growth from 3.2% to 2.9%. The U.S. economy is expected to grow by only 2.4% in 2019, compared to 2.9% last year. Next year, it’s predicted to drop to 2.0%.4

We’ve also seen a recent drop in CEO confidence, meaning they are less likely to invest in expansion, and fewer jobs may be on the horizon.5 Another possible indication is that ultra-high-net-worth investors have been transitioning parts of their investment portfolios into private ventures, alternative investments, and cash in anticipation of a recession in 2020.6


Content prepared by Kara Stefan Communications.


1 Mark Felsenthal. Reuters. Nov. 8, 2007. “Economy faces risks, not recession: Bernanke.” https://www.reuters.com/article/us-usa-bernanke/economy-faces-risks-not-recession-bernanke-idUSWBT00789120071108. Accessed Sept. 25, 2019.

2 Paul Davidson. USA Today. Sept. 9, 2019. “Powell: Fed is not ‘at all’ expecting a recession, saying economy continues to ‘perform well.’” https://www.usatoday.com/story/money/2019/09/06/fed-chair-jerome-powell-no-recession-expected-at-all-u-s/2232221001/. Accessed Sept. 25, 2019.

3 Shane Croucher. Newsweek. Sept. 11, 2019. “If Donald Trump’s China Trade War Escalates, the US Could Lose 800,000 Jobs and Plunge into a Deep Recession: Economists.” https://www.newsweek.com/trump-trade-war-escalates-jobs-deep-recession-moodys-1458706. Accessed Sept. 25, 2019.

4 Antonio Rodriguez and Richard Lein. International Business Times. Sept. 19, 2019. “Trade Tensions Slam Brakes On Global Economy: OECD.” https://www.ibtimes.com/trade-tensions-slam-brakes-global-economy-oecd-2829329. Accessed Sept. 25, 2019.

5 Business Roundtable. 2019. “Business Roundtable CEO Economic Outlook Index Decreases in Q3.” https://www.businessroundtable.org/media/ceo-economic-outlook-index/ceo-economic-outlook-index-q3-2019. Accessed Oct. 10, 2019.

6 Suzanne Woolley and Benjamin Stupples. Bloomberg. Sept. 23, 2019. “The World’s Wealthiest Families Are Stockpiling Cash as Recession Fears Grow.” https://www.bloomberg.com/news/articles/2019-09-23/world-s-wealthiest-families-stockpiling-cash-on-recession-fears. Accessed Sept. 25, 2019.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

1 view
Let's Get Social
  • Facebook Social Icon
  • LinkedIn Social Icon
  • YouTube Social  Icon
Contacts

Provident Wealth Advisors

25511 Budde Road

Suite 1002  The Caroline Building

The Woodlands, TX 77380


281.466.4843
281.466.4817

Info@providentwealthllc.com

Copyright 2018 Provident Wealth Advisors, LLC

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Provident Wealth Advisors, and our editorial staff. Material presented is believed to be from reliable sources, however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Fee based financial planning and investment advisory services are offered by Provident Wealth Advisors, a Registered Investment Advisor in the State of Texas. Insurance products and services are offered through Goodwin Financial Group . Provident Wealth Advisors, and Goodwin Financial Group are affiliated companies. The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the State of Texas or where otherwise legally permitted.