Recession… What will you do?

When will the next recession/slowdown come?

I don’t know. I don’t like predicting, but one will surely come. Of the 28 previous recessions each one has been different. The next one will also be different. There are several things that could be the catalyst for a future recession. Unwinding the experimental monetary policy of the past decade seems to be a likely candidate, but there are plenty of places from which it could originate. Bonds, China, corporate debt, take your pick.

Late last year and into early 2019 there was growing concern that a slowdown and possible recession was on the horizon. That changed quickly as markets rebounded and economic data showed the economy was still on solid footing. First quarter GDP due out next Friday should confirm this. Keep your eye on corporate America for any sign they are preparing for a slowdown like making moves to improve margins (cost cutting labor with increasing productivity) and improving leverage (divestment and building cash). This allows them to weather slowdowns and respond quickly when growth returns.

As experts of markets and investing, your clients will call upon you for accurate and sound advice when a slowdown/recession occurs.

What will you do? What will you recommend?

1. Stay the course even if your clients don’t have a long-time horizon (Maybe you’re using a glide path).
2. Change your strategic allocation to favor bonds and cash.
3. Revert to a rules-based system for allocating assets (not everyone has the discipline this requires).
4. Or perhaps you outsource your decision making to a third-party with a “secret sauce” for growing assets.

Each of these work. Not to the same degree or within the same time-frame, but they work. And because predicting a change in the economy is difficult, you should be preparing now for the time when you’ll need to communicate what you’re going to do to protect your client’s assets during a downturn.

You’ll also need to plan for the future when a better economic environment is at hand. Now is the time. “Buying the dip” has been a simple strategy for making money in markets for quite some time. This will change and your clients should fully understand what to expect when what has worked doesn’t work any longer.

The information and descriptions provided about the Program are for educational and information purposes only and should not be used or construed as investment advice, an offer to sell, a solicitation of an offer to buy, a recommendation for any security, or suggest any course of action. LaSalle St. Investment Advisers (“LSIA”) does not guarantee that the information or descriptions supplied about the Program are complete or timely. LSIA makes no warranty with regard to any results obtained from the Program or its deployment. LSIA is not responsible for any direct or incidental loss incurred by relying on information provided about the Program. The allocations presented herein are illustrations and completely hypothetical. None reflect actual investments or investment results and do not reflect allocation of any individual portfolio. Asset allocation and its results vary over time. Other allocations or asset investment categories not offered in the Program may have characteristics similar or superior to those illustrated. Past performance of any model or allocation is no prediction of future results. Neither the Program nor any system/model can predict the future of any market or price movement in a market. Diversification and asset allocation do not guarantee against the risk of investment loss, including risk of loss of principal. Information provided regarding the Program is as of the date of publication and may change at any time without notice. Information has been included which was obtained from third parties and is believed to be reliable and complete. LSIA does not warrant the accuracy or completeness of such information. LSIA is a registered investment advisor and does not provide tax, accounting or legal advice ‒ the information and/or descriptions provided do not constitute such advice. More information regarding LSIA and its investment strategies can be found in the LSIA brochure, ADV Part II, which is available online or through LSIA. Asset allocation may not be suitable for all investors. Before deciding to invest, potential participants should consult with an investment adviser to determine an appropriate investment strategy and methodology which meets the investor’s specific financial needs, objectives, goals, time horizons and risk tolerance. The information and description provided herein has been made without consideration of any investor’s particular suitability for investing in the Program. Asset allocation also involves investment in various asset classes which are not insured by the government. Investing in fixed income and/or high yield securities involves additional concerns including interest rate risk, credit risk and reinvestment rate risk. Investing in securities outside the United States may entail greater risk than investing in domestic U. S. markets. These risks typically include political and economic uncertainty of foreign countries as well as currency exchange fluctuations, including foreign currency exchange rates, political risks, different methods of accounting, financial reporting and foreign taxes. The prospectus accompanying a security should carefully be reviewed before investing. The services described herein are available to persons residing in any state where they would otherwise be contrary to local law or regulation.

Copyright © 2019 LaSalle St. Investment Advisors, LLC., All rights reserved.