Forecast For US Recession Within Year Hits 100%
The average investor is stup*d
Many analysts have begun to make their predictions about when the recession will begin. As always, this type of analysis starts late when the markets have already discounted most of the downturn. Without going any further, from ATH, we have:
S&P 500: -23%.
Nasdaq 100: -33%.
US Bond +20Y: -40%.
The above Bloomberg cover was published on October 17, 2022. Do you really think it is possible to announce a recession in such a pessimistic market situation as the current one? Today we want to show you what one of the possible scenarios for 2023 could be, but rest assured that it has nothing to do with any crisis similar to anything that happened between 1980-2021.
To do this, we must understand the bond market. Many people still believe that when the recession hits, it will crash the stock market. To do this, analysts continue to use schemes from disinflationary times. But these schemes are no longer of any use.
It is sad that the main pension funds on the European continent do not know how to manage the risk of their portfolios. The managers of these pension plans come up with scenarios based on recent history, and this has nothing to do with what can actually happen.
For those of you who follow our portfolio closely, you know that we do not have bonds in our portfolio for a simple reason. The risk returns they offer us are not attractive at all.
Who wants to have an asset that is based on promises from central banks that keep lying, whose possible rise is 3-6% per year, and we can witness falls of more than 40%? At least we do not want them in our portfolio.
Without going any further so far this year, stocks have performed much better than bonds.
The average investor is stup*d
Once again, we learn from the markets that we should not judge what has not happened and that we should prepare for what we do not know that we do not know (black swans). In these types of events, there is a real danger, which is why good portfolio risk management must be done.
It is not an easy task, but achieving a balance allows you to have extremely good returns in the long term is possible.
This week we have increased our position in a tremendously asymmetric asset such as a leveraged ETF x3. This has allowed us to increase our portfolio by more than 2% in one day, with less than 30% invested in this asset. We tell you about it in more detail in our portfolio section.
Technically we are already in a recession.
The U.S. entered a technical recession after the second quarter 2022 numbers came out. The definition of a recession is negative GDP growth in two consecutive quarters. That happened in the US in the first 2 quarters of 2022.
This makes us wonder why the same analysts are predicting a recession if we are already in one.
There is an answer. And that answer is ugly. Maybe no one wants to hear it. But it's worth saying: there is no solution in sight.
Nothing is being done to move the economy away from recession. Therefore, the only direction is to deepen it. Nothing is going to change. This is both good news and bad news.
It is good news for those who are prepared. But bad news for those who don't understand what is going on.