Act As If A Recession Is In The Cards

Too many Americans are notorious for acting like they are trying to keep up with the Kardashian’s.  As we spend, baby spend, we are not at all prepared for any rainy days, anytime in our future.  In fact, “54% of Americans do not have any reserves past 30 days,” observes  Mrs. Quincy Crosby, Ph.D., Chief Market Strategist, Prudential Financial.

Do not let the recent rallies fool you.  Some investors are wondering if the worst of the market declines amid the COVID-19 pandemic are over.  The Dow, which rose about 1600 points on Monday, April 6, 2020, per Yahoo Finance, is trading around 20% above its’ 52-week intraday low from March.  However, Matt Maley, Chief Market Strategist, at Miller Tabak thinks, “another pullback could be lurking.  This is more of a bear market trap. I just think we’ve had a first period of liquidation.  But I think we could have more of it,” he told Yahoo Finance the same day.

In the same article, Goldman Sachs is out with one of the most bearish forecasts, predicting earnings per share (EPS) in 2020 to plunge around 33% compared to 2019.

No one can predict the future.  But we can prepare for it.  And that includes preparing for the good, the bad, and the unforeseen. For those of us who watch or play sports, you know the team must play both sides of the field, both sides of the net, with offensive and defensive strategies.  Now is the time to be agile.  So no matter how hard the wind blows you may be more likely to bounce back like the palm trees in Hawaii.

Borrowing from my article ‘From Complacency to Panic’ here are my best 7 tips:

  1. Pay down or pay off debt.  You may need that line of credit later more than it is serving you now.
  2. Pay yourself first. If you don’t make yourself your highest priority who is going to do the job for you?  Start saving at 5% off the top of each paycheck. Get to 20% so you can see you may be able to make work optional after your last paycheck.  One of the good things that came out of the Great Depression is Americans were good savers.  Which stands to reason when you can’t buy anything.  We are likely to get acquainted with saving again.
  3. Where ever you have put your money, discover how much loss you can accept.  If you have yet to invest, now may be a good time to start.  But don’t throw your money on the dice table until you have a buy strategy AND a sell strategy in place.  Otherwise, you’re just throwing darts.  In the dark.
  4. Design your portfolio and give it the attention the job deserves, to see if the account may perform within your personalized loss parameters.
  5. Apply active management strategies to your portfolio to help limit losses.  According to me, active management trumps passive investing.  Hire the teams that ask this question DAILY on your behalf; Should coal be put on this fire in a melt-up or is water better at this time to limit a melt-down?
  6. Add more than the traditional stock and bond combination to your portfolio.  Look for other positions that have little or no correlation to the stock market.  Boring sometimes trumps excitement.
  7. To prepare for living too long and dying too soon, do the math to see if each breadwinner in your home has enough life insurance to replace a deceased breadwinner’s income.  Each survivor can survive the loss of their loved one.  Money is not the only thing that can help.  But it touches everything.

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