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.
Important Disclosures
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.
Past performance is not indicative of future results. It is not possible to invest directly in an index. Index performance does not reflect charges and expenses and is not based on actual advisory client assets. Index performance does include the reinvestment of dividends and other distributions
The views expressed in the referenced materials are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward–looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
