Good ideas on how to prepare for the coming bear market.
Grrr......
While earnings are coming in strong for many companies, remember that those earnings generally represent the April thru June period. This period was prior to much of the recent tariff activity and rhetoric. Therefore, it is a lagging indicator in some sense.
On the tariff side, the tariffs are starting to affect farmers. Inflation is rising. Rates are rising. The government is funding farmers when it is already in a deficit position. This may exacerbate in the crowding out effect in the capital markets causing future interest rate increases.
I am still on the side of reducing equity exposure selectively. Timing the market is a fool’s game, but that doesn't mean investors shouldn't tactically adjust portfolio exposures. I have sold those that are high exposed to interest rates or are highly leveraged. As always, I look at how companies have done over extended periods of time. I particularly like companies that have kept earnings positive during the 2008-09 downturn. That signifies management who are skilled in adjusting their business models toward adverse circumstances.
Being mentally prepared for the coming downturn is essential to making “rational” decisions.
As always, stay safe and keep calm. Whatever you do, don't run from the bear as that could incite the bear and cause yourself significant harm!
