Majority of ultra-wealthy expect recession next year

Fifty-five percent of the super-rich around the world are already preparing for a recession. That’s according to a survey by Swiss wealth management company UBS of 360 global family offices with an average family wealth of $1.2 billion. Results showed 55% of family offices see a recession by 2020, and to mitigate risks, 45% are already adjusting their portfolios. An escalated trade war between the U.S. and China has deepened fears of a recession, while the so-called yield curve inversion — a bond market phenomenon that has historically predicted an economic downturn — also intensified those concerns. Many notable investors and economists have recently warned of heightened recession risks. Those families would do well to recognize that stocks actually rose during half of the last 14 recessions, and they were positive in 11 out of the 14 years leading up to a recession. The stock market was down a year later only three times following a recession. In general, stocks tend to perform about average in the year leading up to a recession, below average during a recession, and above average in the one, three, and five year periods following the end of a recession. It’s these types of lessons

October 3, 2019 No Comments

Staring down the yield curve

For the time being, uncertainty will probably hang around like a dark cloud over markets. But that doesn’t mean you should head for the hills. The global economy has started to stagger. Earlier this week, the U.S. stock market tumbled after a historically reliable predictor of recessions flashed a warning signal. Some of the world’s largest economies are either slowing or contracting, including China, Germany, and the United Kingdom. Clearly, there’s a lot going on around the world. What’s a yield curve? And why should I care? The stock selloff on Wednesday was caused by a development in the bond market called a yield curve inversion, which means that the yield–or return–on short-term U.S. bonds exceeded that of long-term bonds. The government needs to pay out higher rates of interest to attract investors to its long-term bonds. The usual pattern is the longer-dated the bond, the higher the yield. But with so many losing confidence in the near-term prospects of the economy and rushing to buy longer-term bonds as a safe haven, investors crowded into bonds, driving up their price and pushing down the yield on the 10-year Treasury note (bond prices and yields move in opposite directions). The result:

August 16, 2019 No Comments

Getting ready for the next recession

It’s only natural to talk about what might be ahead for markets and the economy. We’re currently living through one of the longest economic expansions on record (120 months and counting). This means looking ahead to the next recession. A recession, sometimes called a “contraction,” refers to a decline in economic activity and is, unfortunately, a fact of life in the business world. They can sometimes trigger steep declines in the stock market, and that’s one of the reasons we are always on the lookout at Azzad. We need to know where markets might be headed when the next recession happens, which it inevitably will. It’s not a question of “if,” but “when.” Research shows that although there have been 11 recessions since World War II, only three of them triggered particularly severe market downturns: 1973-1975 (market decline of 48%), 2000-2001 (market decline of 49%), and 2008-2009 (market decline of 56%). Looking at the causes of each of those recessions/bear markets, each of them followed a unique series of circumstances in economic history. The 1973 recession was triggered by an oil embargo targeting the United States, and the 2000 and 2008 recessions were largely due to bubbles in the internet

August 1, 2019 No Comments

Preparing for the next recession

We’ve been talking a lot around the office lately about the next recession and how to prepare our clients for that eventuality. It’s part of our job at Azzad, making sure we’re looking ahead to the next big thing or market-moving event. And it’s only natural to talk about what might be ahead because we’re currently living through one of the longest economic expansions on record (120 months and counting). A recession, sometimes called a “contraction,” refers to a decline in economic activity and is a fact of life in the business world. Recessions can trigger steep declines in the stock market, which is one of the reasons we keep abreast of the health of the U.S. economy. We need to know where markets might be headed when the next recession happens, which it inevitably will. It’s not a question of “if,” but “when.” Research shows that although there have been 11 recessions since World War II, only three of them triggered particularly severe market downturns: 1973-1975 (market decline of 48%), 2000-2001 (market decline of 49%), and 2008-2009 (market decline of 56%). We’ve been looking at the causes of each of those recessions/bear markets, and each of them followed a

July 2, 2019 No Comments