What is happening in the market is ugly. Some are very concerned. The markets have sold off as seen in the chart above. A bear market is offical when we lose more than 20% of the market value in the index. The Tech heavy NASDAQ is down 24.01% as of 5/16/2022, so it is in bear territory. Are we headed into a recession?
First, let’s define a recession. According to the National Bureau of Economic Research (NBER), which officially declares recessions, says the two consecutive quarters of decline in real GDP2,
So here is the rub, we have really low unemployment (3.6% and dropping) and consumer demand is still good.
Conversely, we have super high inflation (8.8% CPI) and the Federal Reserve (guardians of our money and the ones messing up policy) said inflation was transitory early on and pumped more money into the economy. Which is being pointed to as causing this inflation. They are now raising interest rates in a panic to pump the brakes.
So, are we going lower? We are concerned that corporate earnings are moderating. Businesses are taking down their EPS (Earnings Per Share) estimates and more analysts are predicting future market corrections.
Here is where we stand. If you are a long-term investor in the accumulation stage of your life, then take some money off the table and look for dips in the market or undervalued investments to put it back in.
If you are nervous, within 10 years of retirement or in retirement, you may consider a dividend income portfolio. We believe this approach is likely to be in favor in our current investment environment.
There is likely a rough road ahead. It would make sense to review your portfolio now rather than after the next -20% drop.
This may sound crazy at first
By Brian Keith Moon
When the Covid crisis began in March 2020, toilet paper disappeared off the grocery shelves not to return for months. (Fortunately, we shopped at Sam’s and had a small overstock supply.) I have never been a doomsday prepper, but we are living in interesting times. This insane Russian invasion is causing some problems we may not be prepared for. Right now, sanctions are being imposed by every country against Russia. In the Ukraine, there are literally children running planters trying to get crops in the ground, while their parents fight off an invasion. Consider this, Russia produces 18% of the world’s wheat and 14% of the world’s fertilizers. Ukraine produces 5.25% of the world’s wheat, 40.38% of seed oil, and 13.4% of the world’s corn.
My point is maybe you should consider stocking up on emergency supplies. Don’t go nuts but consider stocking up on flour, rice, beans, oils, pastas and other long-lasting foods. If you go to YouTube, there are great videos on how to pack these items in mylar bags with oxygen absorbers for 3–10-year storage times. These items are currently available for sale on Amazon.
The scenario I am most worried about is simply more bare shelves and potentially higher prices for food. President Biden so much as warned there would be food shortages in our future. It may take 6 months to a year before we see problems in our supply chain or nothing may happen. Still, it is better to be prepared.
Proverbs 22:3 says, “A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.”
Buying & Selling Gold? Get ready for a surprise!
Gold is an interesting investment. Many consider it a ‘safe haven’ investment during times of war, inflation or recessions. As seen in the chart below, investing in gold can be a wild ride. We believe that crypto currency has been pulling investors away from gold. (Of course, Cryptocurrencies are losing a lot of value as of late.) Any investment needs buyers and sellers to perform well, but here is the problem for gold investors.
Gold is taxed at a higher rate. Long term capital gains rates for stocks are 20% but gold is considered a collectable (like stamps, art, antiques, and gems) and is taxed at 28%. No matter the type of investment that holds Gold (and other precious metals), you still pay a higher tax rate. Is this a new thing you ask? No, this wonderful piece of tax policy was established in the 1990’s.
One way to avoid paying a higher tax rate on your gold investments is to purchase it inside an IRA.8 Stocks of companies that mine gold are also taxed at the 20% bracket, but often trade out of step with gold prices.
Sources Citations Bibliography:
⦁ According to the QQQ index.
⦁ Quoted from Investopedia “Guide to Economic Recession”
⦁ Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health. – Investopedia
⦁ Source: Bureau of Labor Statistics (bls.gov)
⦁ As seen by the Consumer Spending numbers produced by Bureau of Economic Analysis. March 2022 1.1%, February 2022 0.6%, January 2022 2.0%, & December 2021 -0.9% BEA.gov.
⦁ World Economic Forum 04/13/2022
⦁ NY Post Biden Warns of Food Shortages 03/24/2022
⦁ WealthManagement.com Investors Piling Into Gold…
Supplemental Disclaimers:
This article is informational only and is not investment advice. This is not an offer to buy, hold, or sell investments like securities or insurance products.
Securities and Investment Advisory Services are offered though Toro Bravo Investment Advisors, LLC. Life Insurance and Annuities sold as an insurance broker are not a fiduciary relationship and are not offered by Toro Bravo Investment Advisors, LLC.
Securities or Insurance are not FDIC/SIPC insured and investments contain risk plus could be subject to loss.
Losses could be short term or permanent. Numbers and figures illustrated are hypothetical in nature and past performance is not a guarantee or indication of future results/performance.
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Do not rely solely on the Legal, Tax, or Financial information presented for it may not be suitable for your individual situation.
Consult your legal, tax, and/or financial professional before acting on any strategy or recommendation (i.e. major changes or before initiating the purchase, hold, or sale of any investment or investment strategy). Every individual’s strategy can differ depending on current circumstances and goals.