We Should Embrace This Bull Market – But Beware the Horns
- Long periods of market growth are worth celebrating, but recession is inevitable – and increasingly overdue.
- A historic growth period and anti-recession fiscal policy may be creating a “perfect storm” for severe recession.
- Although it’s tempting to go “all in” on big assets in bull markets, a more dynamic, diverse portfolio can help manage risk and volatility.
Since the world economy began its recovery from the 2008 financial crisis, investors and analysts have warned that future recessions aren’t just likely, but inevitable. However, the incredible market gains of the last four years – punctuated but unaffected by spikes of politics-driven volatility – seem to have erased much of the doom and gloom espoused by prominent bear investors.
In the United States, a major driver of the global economy, corporate deregulation and fiscal policies designed to ease constraints have induced a metaphorical “sugar rush.” Inspired by the market’s record numbers, investors may be tempted to pour large amounts of capital into big market winners, take a “buy and hold” approach, and wait a few years to collect. However, now is precisely the time to introduce more caution, skepticism and dynamism to your investment strategy.
Ironically, the levers pulled to help stimulate rapid financial growth worldwide may ultimately exacerbate the effects of the next recession, turning our sugar rush into a sugar crash. Specific risks identified by analysts include:
- Acute and long-term market shock caused by an escalation of the U.S.-China trade war.
- Aggressive rate cuts and monetary easing while personal and business debts continue to grow.
- Historically low unemployment, which has typically preceded recessions and bear markets.
Pouring all your capital into successful or promising stocks, which are currently trading high and expensive to acquire, is a dangerous game to play. If the market takes a sudden downturn, the punishment could be severe, with little clarity regarding a timeline for recovering losses. Given the risks associated with recent policy and the cyclical nature of booms and busts, managing your portfolio risk using diverse pool of assets shouldn’t be best practice – it should be mandatory.
Develop an investment strategy that factors a dynamic – and sometimes dangerous – market, both today and in the future. Reach out to Cypress Private Wealth to find a strategic partner that has the experience, knowledge, and skills to build a robust plan that’s right for you.
The opinions voiced in this material are for general information only are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
There is no guarantee that an investment strategy will yield positive outcomes. Investing involves risk, including loss principal. The advisors of Cypress Private Wealth are Registered Representatives with, and securities offered through LPL Financial, Member FINRNSIPC. Investment advice is offered through Strategic Wealth Advisors Group, LLC, a registered investment advisor. Strategic Wealth Advisors Group, LLC and Cypress Private Wealth are separate entities from LPL Financial.