A recession is likely on the horizon. The aftereffects from imbalances created by monetary and public health policies put in place during the pandemic make a soft landing unlikely. Higher interest rates and slower GDP growth will continue negatively affecting corporate earnings, leading to more volatility for the equity markets. On a positive note, should a recession occur, we expect it to be milder than 2008 due to less leverage in the financial sector and strong corporate balance sheets.
Referencing the chart below, provided by First Trust, buying additional stocks at a discount during a recession can provide substantial returns in subsequent years.
During times of volatility, it is important to have a portfolio aligned with your risk tolerance and a disciplined rebalancing strategy to take advantage of dips in the market. In the words of Warren Buffet, “Be fearful when others are greedy, and greedy when others are fearful.”
IMPORTANT DISCLOSURES
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).