Broker Check

You can find whatever you are looking for whether positive or negative

August 19, 2022

JPMorgan Chase chief executive Jamie Dimon sees only a 10% chance of an economic slowdown that doesn’t lead to a recession, while warning there are 20% to 30% odds of “something worse.” I agree. But that means that there is a 70% to 80% chance that it won’t happen.

The U.S. economy is still strong and consumer and business balance sheets are in pretty good shape. That is why the markets have been up since June 30th. The question is what has to happen for the worst case to happen and do we even know yet?

Hiked fed rates, quantitative tightening, oil shocks, the war in Ukraine, and rising U.S. tensions with China have pushed Dimon to think that a mild recession has a 20% to 30% chance, while a harder recession has the same odds.

I agree but we will not know any of that for a few months and then the third quarter earnings appear. If they are positive like this quarter past, we will see another rally through to the election. And that is despite what happens with inflation.

The point is that we can see only a quarter at a time for the near future. No one actually knows what is going to happen beyond the end of this year but they tend to bend one way or another.

Two things to keep in mind. One, we are in a secular bull market that will last approximately another 10 years. That means it never pays to get out of the market no matter what happens because the markets tend to correct downturns fairly quickly. Secondly, we don’t know if the Republicans can help with supply after they take over the House and possibly the Senate. If they can, all bets are off and the markets will reward those who stuck it out.

For now I am optimistic for the balance of this year, but read all the news and numbers that come out and will respond to those in my commentaries. If we need to make changes, I will know from the direction of the numbers. I do not agree with those that say go to cash.

The last secular bull market was 1982 to 2000. The average return was over 14% per year. Dalbar, an international company that studies investor behavior, did a study of how individual investors did during the market. The average investor made between 3% and 5%. Why so much lower than the market indices? I suspect it had a lot to do with timing the markets.

My recommendation is to stay in throughout the secular bull market and you will have the average return for that entire period of time which should be around 17 years or 10 more years and the average return for secular bull markets for 200 years is over 13% per year.
It simply does not pay to try to time the market. In this age of internet, the amount of predictions and prognostications is overwhelming. Who is right and who is selling a newsletter or services of a brokerage or bank? I would rather you follow my newsletter where I do not have an agenda just providing good information to make good decisions.

While Goldman Sachs chief executive David Solomon similarly warned there is trouble ahead, urging people to prepare for worsening inflation and an approaching recession, BlackRock CEO Larry Fink told investors to keep calm and carry on—calling the economic headwinds currently roiling markets “business as usual” for long-term investors.

Fink said on CNBC’s Jim Cramer’s Mad Money: “Is there a risk of a recession? Sure there is. And even if we’re in one, it’s going to be quite mild.”

Deutsche Bank CEO Christian Sewing gives the odds of a recession a 50/50 chance, while Harvard economist and economic adviser to the White House under Barack Obama, Jason Furman, says it’s less likely than that.

Isn’t it interesting the number of opinions we get from the pundits of the various investment house? Oppenheimer & Co. chief investment strategist John Stoltzfus—the most optimistic on CNBC’s Market Strategist Survey—said the market will not only avoid a recession but will also rise 40% from where it stands today by the end of 2022.
This prediction mirrored that of other Wall Street strategists, such as David Roche, who says this is a moment to realize that “things do turn around.

My point is that you can find whatever you are looking for whether positive or negative. So the best advice I can give you is to follow the numbers not the people talking about those numbers. We will make sound decisions based on statistical analysis. Please, keep reading these commentaries if you want peace of mind that you are positioned properly.

"This material is provided for general information and is subject to change without notice.  Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. The information does not represent, warrant or imply that services, strategies or methods of analysis offered can or will predict future results, identify market tops or bottoms or insulate investors from losses. Past performance is not a guarantee of future results.  Investors should always consult their financial advisor before acting on any information contained in this newsletter.  The information provided is for illustrative purposes only.  The opinions expressed are those of the author(s) and not necessarily those of Geneos Wealth Management, Inc."