Another post of bearishness, my apologizes. As I’ve said before, I don’t like being bearish, I try to be a positive person but when it comes to the current market environment that’s just been something I haven’t been positive about. From late-September I’ve written about the Trouble For Equities, More Trouble For Equities,Equity Fake Out, and Declining Slope, I haven’t hid my frustration.
This morning Barry Rithotlz, who writes one of my favorite blogs and is a portfolio manager I have a great amount of respect for wrote a note this outlining some of the changes he’s made in his client’s portfolios. Some of the changes include cutting his equity and emerging market exposure, raising cash, and he now expects there is a 60% chance of a recession in the next 18 months.
Here are few of Barry’s comments:
I don’t imagine we go straight down from here; There will be sell offs and rallies, pre and post elections. There will be some data points that suggest things aren’t so bad, and then some that are awful. It is not a black and white situation.
One last point: This is NOT a batten down the hatches, go-to-100%-cash, looking for a 50-60% crash type of expectation. (We, um, already had that one). Instead, this is looking like a regular earnings and revenue shortfall driven recession, with equity markets at risk for a 20-30% correction
Barry also mentions that “Investing is an art form that requires probabilistic decision-making using imperfect information about an inherently unknowable future.” Which I 1000% agree with. Nothing is perfect or right 100% of the time when it comes to trading. Everyone has different risk appetites and time horizons and investing and trading decisions need to be decided around those two variables (among others).
With that, I agree with Barry in regards to his viewpoint on equities. Although I wish I didn’t. We have come down about 5% since mid-September, and as I’ve said before, things don’t typically happen in a straight line. With some pops from a few good days of earnings and/or election results might wash some weak bears out of their positions, but at this point not sure that will be enough.
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