August 2019 Update - The Recession Question and Conventional Wisdom
A man walks into a doctor with lettuce sticking out of his ear.
The doctor says, “I am afraid that is just the tip of the iceberg.”
The S&P 500 declined 1.6% in August a few points off its all-time high, but those numbers are “just the tip of the iceberg.” Escalating US-China trade tensions caused the S&P 500 to decline by 2.5% or more three times in the month and the yield curve inverted leading many to ask, “Are we entering a recession?"
I think a better question is, “Does it even matter if we enter a recession, if the conventional wisdom is that we are entering a recession?”
Before the market declines of 2000 and 2008 the conventional wisdom was the economy was doing great. What hurt investors was owning stocks as the conventional wisdom shifted from positive to negative.
I am not sure why the yield curve is inverting. Maybe it has something to do with the trillions of dollars of negative yielding bonds around the world and speculation that United States will also end up with negative yields in a few years.
If so, that’s a reason to buy shares of growing companies, not to avoid them.
About the Author
Manny Weintraub, CFA, is the President of Integre Asset Management, a New York-based registered investment adviser, that combines investments in industries benefiting from long-term trends with the use of active management to reduce risk. A former Managing Director of Neuberger Berman, where he co-managed more than $1.5 billion in U.S. equity assets, Manny is an experienced portfolio manager and contrarian investor. A graduate of the University of Pennsylvania, he serves on the boards of The Atlantic Theater, and North Country School – Camp Treetops. To learn more about Integre, please visit www.integream.com.
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