No. of Recommendations: 4
Recessions come and go. The mere fact of a recession doesn't really change the value of the typical stock, since almost all of the value of any equity is past the ten year mark. There is pretty much always going to be a recession or two in any given decade.
Yes, agreed. However a recession does often affect the price of the typical stock, and that seems likely here. I'm currently in the midst of a rare, for me, attempt to capitalize on a seemingly exploitable situation, having upped my cash, and thinking about when best to redeploy. I don't want to miss the boat like I did in the Covid bear.
The BIG question, to me, is to what extent any of the recent global changes are longer lasting than a typical recession or bear market. If, for example, global trade intensity is going to be 20% lower in the next 15 years than it would otherwise have been, that is a true and lasting drop in value ... for example, ... billions of dollars worth of factories and equipment and goodwill sitting on company balance sheets that are no longer worth anything at all, because they are located in the wrong place to sell profitably to the destination where their erstwhile clients are located. History shows us that tariffs are often very quick to add, but can take decades to unwind again.
Yes, big question, indeed. Will Trump stick with his tariffs, if so which ones and how high? Seems like 10% globally and higher on China and other assorted countries is probably in the cards for his duration, but probably not 100+% on China for long. That seems like plenty to induce a serious recession and some quasi-permanent destruction of economic capacity if sustained for his term. Will the next President reverse course entirely, partially, or not at all?
If we do enter a serious recession with associated extended and deep bear market, will Trump declare 'victory' and relent? He is unpredictable, as is the economy, so I don't think I should hold out for a deep deep bottom that I may not recognize when it's there. So, my tentative plan is to re-invest after the first cluster of major bottom signals.
The meat of my plan is more about switching from highly valued large cap to cheaply valued small cap, but there is a timing element too, which may be dumb of me to even try.
