How to adjust your portfolio for a possible downturn

Financial Advisors

  • About two-thirds of Americans believe the country is approaching or already in recession, according to a recent CNBC survey.
  • But experts say it’s a mistake to constantly adjust your portfolio based on the latest economic news.

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Amid rising interest rates, turmoil in the banking industry and job cuts, the threat of a recession weighs heavily on many investors’ minds. But financial advisers say you should still avoid passive investment moves.

A recent CNBC survey found that public pessimism about the economy hit a recent high. About two-thirds of Americans believe the country is approaching or already in recession.

While you may want to protect your assets from a possible economic downturn, advisers say it’s important to stick to your risk tolerance and target-based planning.

Amy Hubble, Principal Investment Advisor, Certified Financial Planner, and Certified Financial Planner at Radix Financial in Oklahoma City, said, “We’re steering our portfolios to beat the looming recession boogeyman and any crisis of the day. It’s a mistake to always try to change.”

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“Stock prices are leading indicators and represent future expectations, and GDP measurements are lagging indicators,” he said. “So by the time we have data that proves a recession, the market will be looking beyond.”

Hubble says focus on what you can control. For example, save more than you spend, invest regularly, maintain diversification, avoid high fees, and seek tax savings.

Economic indicators like the so-called inverted yield curve (when yields on short-term government bonds are higher than long-term government bonds) could be one of the signals of a possible recession, but experts say humans often don’t. As a result, they tend to recognize and interpret patterns such as: Waited for my daughter to fall asleep.

Charles Sachs, CFP and chief investment officer at Kauffman Rossin Wealth in Miami, said it’s impossible to know when future events will occur, “so how badly are economists predicting recessions?” Is there a lot of jokes that have been circulating?

“Don’t let the noise affect you,” he said, emphasizing the importance of a “long-term, strategic focus” on asset allocation.

“People get caught up in the gamification of investing,” he said, but there’s a reason investors like Warren Buffett don’t. “They are buying good companies at good prices and making long-term investments.”

Assets such as high-grade bonds have historically performed well in recessions, but it’s hard for investors to “beat the market,” said Elliott Harman, CFP and partner at PRW Wealth Management in Quincy, Massachusetts. said.

“The market is looking to the future,” he said. “Therefore, maintaining a well-diversified portfolio has never been more important, because whether you allow yourself to participate when the market is going up or protect yourself when the market is going down. because you can.”

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