How the upcoming RECESSION will impact your STOCK PORTFOLIO | Akshat Shrivastava

Summary

In this video, the host addresses the recent stock market downturn and recession concerns, offering a multi-decadal analysis of recessions and stock market performance to aid in portfolio planning. They share their personal move to a multi-asset portfolio allocation and discuss the importance of diversification to handle market volatility. The video also touches on economic indicators like unemployment rates and term premiums, providing insights into market trends and strategies for investors to consider.

Takeaways

• 📉 The recent dip in the stock market has led to recession fears, with some predicting significant market drops.
• 💡 The speaker aims to provide a multi-decadal perspective on recessions and stock market performance to aid in portfolio planning.
• 🔄 The speaker is transitioning their portfolio to a multi-asset allocation strategy, suggesting viewers consider doing the same.
• 👨‍🏫 An introduction to Build School is provided, promoting a master class for creating AI apps without coding knowledge.
• 📈 Historical data shows that during recessions, the stock market has sometimes risen, challenging the direct correlation between recessions and market downturns.
• 📊 Pre-recession, the S&P 500 typically drops by 4% on average, and post-recession, it rises by 15.5%, indicating a potential recovery pattern.
• 📉 The average market drop during a recession is about 21%, which is a significant data point for investors to consider.
• 🚫 Timing the market based on recession predictions is difficult and not recommended; instead, prepare for potential market corrections.
• 📈 Low unemployment rates can signal an economic peak and potentially precede a recession, as they did before the 2008 crisis.
• 📚 The video emphasizes the importance of understanding market volatility, sector rotation, and interest rate margins for successful investing.
• 💼 A multi-asset portfolio is recommended for growth, defense against market falls, and generating cash flow, suggesting a balanced investment approach.

Q & A

What is the main focus of the video?

The main focus of the video is to help viewers understand the reality of recessions and stock market performance through a multi-decadal viewpoint, and to discuss the concept of converting a portfolio into a multi-asset portfolio allocation.

What does the speaker suggest is a key indicator of an upcoming recession?

The speaker suggests that a low unemployment rate can be an indicator of an upcoming recession, as it has historically spiked after periods of very low unemployment, signaling a potential economic downturn.

What is the average market drop prior to a recession according to the data analyzed in the video?

According to the data analyzed in the video, the average market drop prior to the start of a recession is 4%.

How does the speaker define a recession?

The speaker defines a recession as a period where there is negative GDP growth for two consecutive quarters.

What is the average market recovery after the end of a recession as per the video?

The video states that the average market recovery after the formal end of a recession is a rise of 15.5%.

What is the term 'term premium' as mentioned in the video, and why is it significant?

The 'term premium' refers to the additional return investors demand for holding long-term bonds over short-term bonds. It's significant because a low term premium can lead to higher market volatility and sideways market movements.

Why does the speaker believe a massive market correction of more than 20% is unlikely in the next 6 to 12 months?

The speaker believes a massive market correction of more than 20% is unlikely due to the current economic indicators, such as interest rate margins and the potential for government intervention to stimulate the economy.

What is the importance of a multi-asset portfolio allocation as discussed in the video?

A multi-asset portfolio allocation is important because it should serve three purposes: grow your money, provide defense in case the market falls, and generate cash flows. This diversification helps manage risk and take advantage of various market opportunities.

What is the role of artificial intelligence in the context of the video?

Artificial intelligence is introduced as a tool for learning and development, with the video promoting a master class from build school that teaches how to build AI apps without coding, which can be beneficial for those interested in the market space.

What is the significance of the unemployment rate in predicting recessions as discussed in the video?

The video discusses the significance of the unemployment rate in predicting recessions by noting that historically, very low unemployment rates have been followed by economic downturns, suggesting that low unemployment rates can signal an increased chance of a recession.

How does the inverted yield curve relate to market volatility according to the video?

The video explains that an inverted yield curve, where short-term bonds offer higher returns than long-term bonds, can lead to higher market volatility and sideways market movements, as it influences investor behavior towards short-term investments.