“The bank recommended investors prepare for a stock market sell-off of as much as 20% within the next few months because of a potential recession” says Market Insider
Over the past couple months stocks have been rising, However, many financial forecasters believe this is a warning sign of an impending recession. Most experts predict this will happen soon which is alarming but what can a financial advisor suggest to do in a situation like this to his clients?
Goldman Sachs’ David Kostin gave five reasons why buying insurance for their stock portfolio is a good answer:
- “Downside protection is attractively priced.”
- Narrow market rally suggests drawdown risk is elevated.
- Valuations are high in absolute and relative terms.
- Equities already price an optimistic outlook.
- Positioning is no longer a tailwind to equities.
At times like this when stocks are trading very bullish there will be drawbacks to follow. It is important to position your assets accordingly. With recent spikes in the S&P 500 now is a good chance to move off any high-risk trades and move into safer more viable options.
The future is uncertain but it is important to monitor trends and advise your clients the best way you know possible. Even though your suggestions will not always be homeruns and large gains it is equally important to help minimize losses.