Cash Not Best Option For 2022
An asymmetric portfolio is what can really make you money
The market has advanced more than 80% in the last three years, and Wall Street veterans continue to say that the markets will remain bullish through 2022.
These claims are based on the fact that the Fed has injected liquidity into the market whenever there has been a correction, no matter how small.
These injections generate a lot of complacency from investors who see how their stocks are revalued at double digits year after year, while they do not see the inherent risks.
“The higher the market rise, the worse the fall.”
In our view, the markets these next two years will be a turning point in the rally we have seen since 2008. The risks in the markets are very high, and the FED has already announced that it will cut bond purchases.
When these liquidity cuts occur, we see the most bearish years.
While not a perfect correlation, it is high enough to merit attention. With global central banks cutting liquidity, the government providing less and inflationary pressures taking care of the rest, increasing risk management practices is worth considering.
In addition to tapering, we expect rate hikes in May, July, and November, although we would not be surprised to see more at one of the FOMC meetings.
On top of all this, we must add the inflationary pressures that we will suffer over the next few years and the shortages of raw materials that we are going to continue to experience.
The outlook is certainly not idyllic, far from it. In these scenarios, what most investors decide to do is to put their assets in cash. This is a grave mistake because it is impossible always to be right with the future of the markets, and this generally reduces the profitability in the long term.
That is why we must have an asymmetric and uncorrelated portfolio that benefits from any possible scenario so that you can benefit from downturns and have liquidity when the rest of the market needs it and be able to buy at a discount.
Prominent investors are made during bear markets, and a recession will undoubtedly catch many with highly leveraged positions that they will have to liquidate.
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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.