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
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
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
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
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.
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