Hamilton Mobley

View Original

Warnings

Warnings

A recession is being spoken about more and more. UBS took a poll of wealthy investors and found that increasingly more are preparing for a downturn. Mike Maloney of goldsilver.com has a video explaining the correlation between interest rate cuts being used to time recessions.

UBS is took and poll and found that wealthy investors are hedging against a market downturn.[1]

“A majority of rich investors expect a significant drop in markets before the end of next year, and 25% of their average assets are currently in cash, according to a survey of more than 3,400 global respondents. The U.S.-China trade conflict is their top geopolitical concern, while the upcoming American presidential election is seen as another significant threat to portfolios.

Still, it seems that wealthy investor caution is strictly for the short-term. Almost 70% of respondents globally are optimistic about investment returns over the next 10 years.

‘The challenge is that they seem to want to respond’ to short-term uncertainty ‘by really shortening their time horizons and shifting to assets like cash that are safe,’ said Michael Crook, a managing director on the investment strategy team. Though with many of these people investing on a time horizon across decades and for future generations, that ‘seems like a mismatch.’”

Mike Maloney points out that in the past two recessions, the Fed cutting interest rates preceded a recession by a few months. The December 2000 rate cut preceded the recession in March 2001 by 3 months and the July 2007 rate cut preceded the Great Recession beginning in December 2007 by 5 months. July 2019 was the first rate cut since 2008 and ocurred 4 months ago as of November.

Rate cuts continued on September 18th and October 30th. Go to the 7:52 minute mark but the whole presentation is interesting.[2]


[1] https://www.bloomberg.com/news/articles/2019-11-12/world-s-rich-readying-for-major-stock-sell-off-ubs-wealth-says

 

[2]https://www.youtube.com/watch?v=u-i1nbpLfZY