We don’t think so, and no, it isn’t safe to invest in markets now. Growth has been slowing in recent months and we anticipate the slowdown will accelerate. This was likely even before inflation hit 8.5% and key borrowing rates spiked across the board. Both of these things have and will probably continue to reduce consumption and overall economic activity. The slowdowns we’ve experienced over the last 12 years since the financial crisis didn’t face these same challenges. In addition, stocks remain historically stretched in terms of their price relative to more grounded metrics like sales, cash flows, and overall economic activity. Given that financial market events tend to take place during periods of economic contraction, investing indiscriminately in the S&P 500, Nasdaq, or any other index right now isn’t the kind of bet we’d be making.
That said, there is an opportunity to seek out investments that tend to perform better during these economic conditions. We’ve discussed how high-quality bonds, commodities, precious metals, and even cash, despite inflation being high, have the potential to both preserve and grow your capital over the short to intermediate term. Of course, as economic and market conditions change, the attractiveness of these categories will change as well. Investors need to be nimble and paying close attention in today’s world. Change happens quickly. For our clients, this is what you pay us to do.
Editor’s Note: This article was originally published in the May 2022 edition of our “Cadence Clips” newsletter.
This blog is provided for informational purposes and is not to be considered investment advice or a solicitation to buy or sell securities. Cadence Wealth Management, LLC, a registered investment advisor, may only provide advice after entering into an advisory agreement and obtaining all relevant information from a client. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
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