Searching Planning to Invest during a Recession - 2
By Saghir A. Aslam
Rawalpindi
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live with dignity and fulfil their moral obligations towards charitable activities).
Rolling Recessions
Spiking interest rates are beginning to hurt a vast array of consumers, businesses, and financial assets. Add Russia's war in Ukraine, the lingering pandemic and heightened tensions between the United States and China, and you have quite a bad picture. Note to investors, "Several segments of the economy are experiencing their own recessions, including housing and segments of the goods side of the economy" addition to housing, the auto, semiconductor, personal computer and retail sectors have been going through what one calls "rolling recessions."
Much of this is already abating, and it's entirely possible that the slowdowns underway won't be deep enough or pervasive enough to become a classic recession. All of us are already feeling the impact of inflation, during the last 60 days petrol prices have jumped every single day for several days.
In this essentially benign view, corporate earnings growth is almost certain to decline, stocks will remain volatile, and inflation will remain well above 2 percent. But the situation will improve fairly soon. There will still be rough moments in the markets in the months ahead, but the prospects for the next year or so would be quite positive.
Already in Recession?
Compared with some alternatives, it might even be a good thing if we were already in a recession. Here's the logic which accepts the consensus wisdom that a recession some. time within the next year is probable. The stock market typically rebounds after midterm elections, but a recession in 2023 would probably smother a postelection bounce. The "most bullish scenario I've come up with, given these assumptions, would be that we are in a recession already, or will be very soon, and that it ends in early 2023." That timing is theoretically possible, though I’m not counting on it. The National Bureau of Economic Research doesn't declare a recession until long after the downturn has started, and often, not until it has ended. We could well be in one now. If that were the case, as signs of damage to the economy become evident, the Fed will be expected to stop raising interest rates. That, in turn, could set off rallies in both stocks and bonds.
This article is written in collaboration with Walt Hommerding senior vice president investment of Wells Fargo .
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
