prepare for recession

Get yourself prepare for Recession in UK

There are number of predictions coming over and almost everyone is highlighting people prepare for recession in UK. Check out what Alexander Green, chief investment Strategist, at the Oxford Club shares;

Is there going to be a recession, and if so, what did you do about it, and how do you deal with these volatile financial markets we’ve been having lately?

Now read forward to find a little bit about what’s happening and why?

Reason the market is down so sharper this year?

  • Highest inflation in 40 years since 1981
  • Federal Reserve that’s set to take interest rates substantially higher
  • It makes it more expensive for consumers, businesses and governments to borrow
  • Lockdown in China that’s continuing to foul up the global supply chain
  • Make it tough for consumers to get what they want and for companies to sell all the things they want
  • An ongoing war in Ukraine, which is not only a humanitarian crisis, but also is causing oil and gas prices to rise,
  • Fuel prices to rise
  • Further disruption of the supply chain, and so on.

So there are lots of negatives out there, but there are a number of positives, too.

And you can make a strong case right now that the market is acting worse than the economy and that’s normal in some ways and that the market is always looking ahead. What happened yesterday is not important. What’s important is what’s going to happen in six months or nine months. And of course, the view was always hazy, so no one really knows.

But investors are using the market to devote with their wallets and make their best guesses what’s likely to happen. And right now, people are quite negative about the outlook for the economy.

He continued that, I’m not so negative. And I’ll tell you why. Businesses and consumers are flush with cash. That’s not only because of all the stimulus that we’ve had and the low interest rates that we’ve had, but because savings rates are high. Consumers, quite frankly, are ready to get out and start spending on experiential goods and services. They want to travel and dine and entertain and do all those things.

He thinks you’re going to see a shift not from consumer spending to not spending, but consumer shifting from expensive goods like home furniture and big computer systems to travel and dining and entertainment and more types of services.

He think the economy is going to be good. So those are his thoughts on whether there will be a recession.

What should you do as an investor?

He want to remind everyone that he is commenting on exactly that question every week. One can’t run their portfolio based on your guess or someone else’s guess about what’s likely to happen.

But he want to start with the idea that you don’t react to what’s happening in the market so much as you tweak your portfolio gradually making wholesale changes is a mistake. People tend to regret it because if you feel like you have to get fully invested at the top of the market or you have to get out of the market at the bottom you look back and you tend to be regretting what you did because you’re reacting to what’s happening.

And the better idea as an investor is to set up a portfolio that’s designed to take advantage of whatever circumstances might be coming our way. So if large cap stocks are doing well, you’re there. Small cap stocks are doing well, you’re there. If short term bonds are the place to be, you’re there. Your money spread around into different areas.

We have an asset allocation model portfolio that suggests that investors at all times have approximately 30% of their money in US stocks, 30% in international stocks, 10% each in high yield bonds, high grade bonds, and inflation adjusted Treasuries none of which are long term by the way which is not the place to be in the bond market. Then 5% each in real estate investment trusts and gold shares.

And if you do that, you’re prepared for whatever the market throws at you. And remember as an investor if you’re investing to meet long term goals which is the only thing you save for short term goals, you invest for long term goals. If you’re investing for money, you’re going to use five years, ten years, 30 years from now.

It doesn’t really matter what the stock market does this week or this month. In fact, it doesn’t matter at all except to the extent that it’s offering you opportunities to buy high quality assets while they’re cheap.

So I want to encourage you to stick to first principles at a time like allocate your portfolio properly, diversify broadly. And you’re going to be way ahead of 95% of the investors out there.