How to brace your portfolio for another recession U.S. stocks, emerging markets, bonds, gold all need attitude adjustment
odumba brings "changes: nickel and pennies" to your portfolio
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By Jonathan Burton, MarketWatch
Reuters
SAN FRANCISCO (MarketWatch) — The risk of another recession in the U.S. is growing and investors need to adjust their portfolio holdings accordingly.
The downgrade of U.S. Treasury debt late Friday only underscores the need to examine the investments you own, why you own them, and the risk you’re taking. The types and amount of domestic and international stocks in your portfolio, and your opinion of emerging markets, cash and U.S. government bonds — even the reason for owning gold — all need to be reassessed in order for your investments to thrive in a challenging, slow- or no-growth environment.
“At this point it’s only a question of whether [a recession] has already begun,” said David Rosenberg, chief economist and strategist at Toronto-based investment manager Gluskin Sheff.
Investors clearly believe they already know the answer, given the punishing selloff in stocks worldwide over the past week.
The waterfall-like plunge in equity markets on Thursday, the roller-coaster trading on Friday and the sharp rally in safe-haven Treasurys suggests that investors are locking into a defensive posture they may be reluctant to give up easily.
And now that debt-ratings firm Standard & Poor’s has stripped the U.S. of its triple-A rating for the first time, dropping it a notch to AA+ out of concern over the U.S. political process, both stock and bond investors have yet another imperative to consider new ways to take advantage of less-forgiving market conditions. Read more: U.S. debt rating cut by S&P.
“We are not likely done with this correction, as the factors that triggered this selloff have yet to be addressed, let alone successfully resolved,” said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research, in a note to clients on Friday.
While another recession within 12 months is more likely — many observers now put the odds at about one-in-three — those who believe the economy will escape this mud-stained “soft patch” without a setback may ultimately be right. Read more: Investors to address debt downgrade, Fed moves.
Regardless, it’s clear that the investing playbook is changing. Here’s what you need to know to stay ahead in the game: |
