How investors should approach Volatility 2023

Commentary

The market’s fixation on inflation and the Fed’s interest rate moves appears, at least for now, over.

We’re moving onto real concerns such as an economic recessionFor more information, please visit: investorsAs a result, corporate earnings and growth decrease. 

This column isn’t going to predict where the S&P 500 will end next year. Nobody knows. Few investors today are familiar with dealing with the combination of factors that affect the current economy. It will take a lot of skill to successfully navigate through the unknowns. When will rates stabilize? Will the Fed move to QE? unknown unknowns (Geopolitics). Are we at war? Another pandemic How does this affect the economy and markets?

Even though this is a bleak beginning, it’s not all bad. Investors should be ready to use a variety of tools, depending on the year.

Take care

This is partially math. Let’s say you have two portfolios, one a fairly defensive one and one an aggressively growth one, with $100 in each account to start. The portfolio that is defensive makes a modest 7 per cent total return over twelve months (e.g. Ending at $107. In the first six months, the aggressive portfolio lost 10 percent. The aggressive portfolio would need to gain another 19% the remainder of the year to parity with the defense portfolio (to reach $107) at the end.

Put differently, in the long term it’s usually better to pass up higher returns than to suffer losses.

What are defensive stocks? It refers to those industries that are less economically vulnerable such as food and drink, household products, and grocery stores. Healthcare (people still need medicine and treatment regardless of the economy), defense, and infrastructure are all examples.