Economy · August 6, 2022

A partial recession | The Manila Times

I SPENT a rainy day during the summer vacation with my “belief model”. Investors basically want to know if the market is going up or down, which I fully understand. Here, I use the belief model for a disciplined way of evaluating changes in a large number of variables. In fact, this work is the basis of the final rating, up or down, so such a day is quite important.

In my opinion, there is no right or wrong way to perform well and there are several ways to go. My assessment is that investors are currently facing a period in which they can choose to navigate the markets based on their good feeling with market movements. One example is that I currently believe that financial markets are stronger than they have been and for some investors this may be a sufficient incentive to increase their allocation to equities, credit bonds, etc.

In seeking returns, you can also choose to work with a belief model. Here, the above considerations on market momentums are certainly important, but this assessment is not isolated and combines with a large number of other factors, adding complexity to the work.

Working with a belief model doesn’t necessarily lead to greater performance, especially not during good times, but over the decades I’ve learned to think about the belief model because it improves work discipline, which I believe is a better way to incorporate new ones. those developments / trends.

Then, in my opinion, there is the most important reason for a belief model, which is that it is a good way to describe the premises for one’s valuations and investments.

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This is incredibly important when an investment or valuation goes wrong, as the reason is often a change in the premises that created the basis for the investment decision.

When this happens, it is often a sign that you need to get out of the investment and the half-truth behind a good return over time is to leave the investment as quickly as possible when the conditions for the investment no longer hold up. Therefore, a rainy day together with the belief pattern can turn into sunshine very well.

The belief model is currently under some sort of pressure due to the numerous changes currently affecting the financial markets; this is further intensified for a number of other different reasons. It is so vast; it absolutely cannot be described in a single column. This may be because the global economy is still in turmoil and must first find a new balance, but the global economy may also be undergoing major changes that we may not even be able to describe, which is not impossible.

The United States is currently experiencing the fourth highest inflation period since World War II. It requires a good deal of alternative thinking and economic imagination to conclude on the ultimate consequences of this. I don’t know if I am able to think for myself, although my perception of political leadership in many countries is that they want a global economy back to the way it was, which is happening in some countries, even blunt in several countries in the area. euro, especially those that were close to zero growth before the Covid-19 pandemic. In other countries, the economy may go in new directions, where I expect this direction to become clearer once inflation has calmed down.

An investor will likely be surprised when, for example, they watch German news about the labor shortage while at the same time economists outperform each other in predicting how quickly Germany will go into recession. I consider these examples of many imbalances in economies and, to me, its unfamiliar territory where the new balances will be established.

One of my findings from the belief model naturally deals with the expectation of an impending recession in Western economies. Households from various large economies, as well as from the entire OECD area (Organization for Economic Cooperation and Development), are experiencing a decline in household disposable income. One consequence is that consumers have to choose where to cut their consumption and apparently streaming services have already been cut in many American households. On the contrary, everyone in Western countries clearly wants to travel, so much so that it has given southern European economies a much-needed boost in second quarter GDP (gross domestic product).

My immediate thought is that many countries may rather experience a partial recession, with some sectors struggling, while others will continue business at a relatively reasonable level. So, if you enjoy working with elements of the belief model, a next step might be to identify the sectors that will be hit by a partial recession in the next 18 months and which sectors will emerge unscathed.

Peter Lundgreen is the founding CEO of Lundgreen’s Capital. He is a professional investment advisor with over 30 years of experience and a powerful investment and finance entrepreneur. Peter is an international columnist and speaker on topics related to global financial markets.