My last post dug into what the “experts” are predicting for this year. Here are my thoughts on that consensus:
- I tend to think if we avoid those “tail risks” we could have a very good year on the S&P, higher than consensus.
- At the same time I think the chances of one of those “tail risks” popping up is probably higher than the bulls believe.
- This makes the market hard to handicap.
- So my conclusion reflects this discrepancy, that by year end we will end up in the poles – either up nicely or down poorly.
- I really think the US economy could surprise here if it doesn't get derailed, despite the secular deleveraging trend.
- Here are some general strategies on how to play divergent conclusion:
Please keep in mind that I am just sharing some general strategies on how to navigate the current environment. If you implement the above successfully, you can hopefully still get some upside while limiting your downside.
- Avoid the riskiest assets
- Regardless of asset class, move up the quality chain
- Focus on investments that benefit from monetary/fiscal policy
- Think about investments that are less economically cyclical
- Avoid illiquid investments
