Sugar-Coating the Likelihood of a Recession

Does anyone remember when then President Donald Trump told the American population that the Covid-19 lockdowns and spread of the virus that caused the pandemic would all be over by Easter? Or when referring to Covid-19, that it was “the flu”?

During the first few weeks of the pandemic, President Donald Trump downplayed the severity of the virus to not panic the American population. In hindsight, perhaps the early days, especially when the country was in lockdown, it would have been more beneficial to not sugar-coat the virus and the timeline of when the government would lift the lockdown restrictions.

Had President Donald Trump told people the virus would kill hundreds of thousands of people, perhaps we could have stopped the virus from spreading during the lockdowns.

If President Trump hadn’t given a timeline for the lockdowns and the pandemic seeing brighter days, perhaps the government wouldn’t have lost its creditability with so many Americans during the summer of 2020 and its continued response to the pandemic.

Our current situation with the Federal Reserve and its chairman Jerome Powell, is very reminiscent of the early days of the Covid-19 pandemic.

Back in the winter and early spring, Powell told us that inflation was “transitory” and wouldn’t last. He even said current inflation wouldn’t need aggressive monetary policy changes to fall. Then, even when Powell began to raise interest rates, he told Americans that there was a high probability of a soft landing, referring to the idea that the Fed could bring down inflation slowly and gently.

Powell continued to tell us this summer that raising interest rates gradually and methodically would lower inflation but not put the economy in a recession.

Fast forward to just a week ago, and Powell tells us that the “chances of a soft landing are likely to diminish.” Inflation has hardly moved even though the Fed has raised interest rates five times, starting in March 2022. At that time, the Fed increased rates by 0.25%, 0.50% in May, then a 0.75% bump in June, July, and September.

Powell also said at the most recent Fed press conference following its announcement of the September rate hike that “we have to get inflation behind us. I wish there were a painless way to do that. There isn’t." Continue reading "Sugar-Coating the Likelihood of a Recession"

ETFs For A Negative Market Turn

Do you believe the current market rally is here to stay?

That belief would mean that despite two consecutive quarters of negative Gross Domestic Profit numbers and the Federal Reserve continuing to increase interest rates as a method to bring down inflation, which is at a level that we have not seen since the 1980s, we actually are not currently staring down the barrel of a recession.

There are economists and market participants currently on both sides of the argument of whether or not we are heading towards a recession.

I am not personally confident enough to invest based on where I think we are heading in the short term. But I still like to know what is available for me to buy if the tide seems to be turning one way or the other.

As I mentioned, I would like to give you a few ETFs that would make you money if the market turns negative. These ETFs are all inverse or leveraged funds, meaning they will experience contango if held for longer than one day. Lastly, I would also like to point out that these ETFs, if used correctly, could help investors hedge their portfolio’s against a market correction.

The first few I would like to mention are the basic inverse ETFs that track major indexes. The Direxion Daily S&P 500 Bear 1X Shares ETF (SPDN) tracks the S&P 500 and will increase in value daily if the S&P 500 goes lower.

For example, if the S&P 500 falls 1%, SPDN will increase by 1%. However, if the S&P 500 increases by 1%, SPDN will decrease by 1%. SPDN and every other ETF I mention today will only produce a near-exact correlation to its corresponding index on a one-day basis. Continue reading "ETFs For A Negative Market Turn"