In this post I will outline some thoughts on my individual investment strategy for the subsequent couple of years. Please give your opinion on your personal plans and critique mine. Initial off, let me say that I think there will be a recession in the subsequent 1-three years. There are lots of factors to consider this and I will not be going into them right here since I want to concentrate on what to do if this is the case. The clear play is to get puts, the query becomes when to get and when to sell. The 1st key metric I am searching at is the yield curve, which just inverted. If it stays like this for 3 months, it will signal a recession. Verify out this web-site for fantastic graphs on this topic https://www.gurufocus.com/yield_curve.php By this logic, I should really wait as the yield curve inversion normally predates a recession by eight-12 months. A recession is normally not announced by the NBER till about eight months immediately after it began so if they’ve announced a recession, I’ve currently missed my chance. In truth, the aim would be to sell shortly immediately after the NBER announces a recession. https://www.nber.org/cycles.html Add to this that the stock market place usually peaks about three months ahead of the starting of a recession, so I should really be obtaining my puts in five-9 months by this metric.
A different issue to appear at is this survey https://www.fuqua.duke.edu/duke-fuqua-insights/cfo-survey-december-2018 It states that 48.six% of U.S. CFO’s think that the nation’s economy will be in recession by the finish of 2019 and that 82% think that a recession will have begun by the finish of 2020. This is one particular of these factors had been predicting a recession could essentially bring about one particular since if CFO’s genuinely think a recession is imminent, they will withhold investments therefore causing the economy to slow and beginning to prove their recession thesis.
Complicating this is the truth that the rest of the globe is in a far worse position then the United States. China has been getting problems for about a year and a half now, and I by no means know how significantly to trust their official numbers. Europe has also been weak, and Brexit combined with a weak China could quickly push it into a recession significantly sooner than the United States. So, what’s the play.
The existing strategy calls for promoting off any stock which hits a new peak inside the subsequent 12 months, any that do not attain new heights will be carried by means of the downturn. This also enables me to continue to reap the added benefits of this economy and hedge in case I am incorrect about the downturn. The subsequent step is to get puts in five – 9 months expiring in mid-2021.
There are two fears in this scenario. One particular is that the stock market place has currently peaked and that I should really be obtaining my puts now. Most of the other indicators are pointing downwards and maybe the rest of the world’s weakness will hurry an American recession, creating the Yield Curve a shorter indicator than in the previous. The second be concerned is that even with all the possible faults in the economy nothing at all catastrophic occurs and we keep away from a recession for the subsequent two-three years in which case my puts could expire worthless. What are your thoughts on the existing circumstances, and what are your plans for the subsequent couple of years?