'Everyone has a plan 'til they get punched in the mouth' - Mike Tyson, boxer
If you have ever had the good fortune to have visited Calgary before, you will know that weather forecasts stretching out much further than the next day are suspect at best. So when planning a day out, one is best advised to bring plenty of layers along…just in case.
Today’s economic climate demands the same levels of preparedness.
In January 2016, the S&P 500 dropped from 2044 on Dec 31st to a low of 1812 on Jan 20th and back again to 1940 by month-end. Intra-day swings unheard of a year ago have now become commonplace. The Fed ‘put’ has been put to the test.
By now, the pattern of ‘rescuing’ equity markets from precipitous drops has become fashionable and have spared many an investor from facing the harsh reality that at some point, the markets’ first responders may simply not show up.
What to do then?
Well, by then it will be too late. We suggest preparing portfolios in advance by having exposure to strategies that have the ability to preserve capital and generate positive returns in sustained negative markets.
The plan that works? Avoid getting punched, be patient and punch back.