By Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.
Our first article was on how to deepen your analytical rigor and portfolio optimization math to find better investments.
The second was on how credit quality is slipping quickly, since July 31, 2022 to through January, 2023.
If the US consumer is struggling 50% harder (defaults and delinquencies up ~50%) to pay their credit cards and their car loans, and they are borrowing more, how are they going to buy new things and keep the economy growing? This is a recession warning to us, and so it matters even more to have a firm grasp on the US stock market and how to stay safely invested.
Many will ask whether they should pull out their life savings and what to do with them. Some fear the unknown and panic. What we say is to stay invested, not to take risk in flashing cash around, and most importantly:
1. Allocate a little more of your money into risk-free assets
For example, if you are a US Citizen, take $10,000 out of more risky investments and buy US Savings Bonds, iSeries. If you have larger savings, maybe put some money into US Treasury bills via TreasuryDirect.gov, where there is no cost and you can invest side by side with Very Large Banks by bidding non-competitively on 4-week, 13-week, and even 52-week Treasury Bills. These are yielding between 4.5% and 5.2% currently.
2. Stay diversified
If you have some 'high flyer' stocks, maybe sell a little and put the proceeds into diversified index funds. If you have concentrated bets, maybe loosen them up and spread them around more. Our model suggests that instead of investing in 2 or 3 stocks (as when the market was rising), now it wants us to hold 38 stocks evenly, and many are household names in consumer staples, pharmaceuticals, fast food, snacks and beverages...companies that will do well when recession hits.
Good luck in the markets today.
Here is a link to our Medium profile: chicagoquantum dot medium dot com.
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Full-time investment advisor and student of the financial markets.