The wheels are coming off the economic cycle — central bank intervention or not.
That’s one of the conclusions of 209 fund managers who collectively handle almost $600 billion in assets. In the latest Bank of America Merrill Lynch monthly survey, a whopping 59% of those polled said we’re in the “late cycle” phase for the economy.
That’s the highest percentage going back to August 2008, as you can see in this chart:
What does that mean exactly? It means the economy is tired. Growth is on its last legs. Consumer and business sales momentum is slowing, while inventories are piling up and credit conditions are getting tighter.
It also means that more “financial engineering,” such as piling on more debt to fritter away on stock buybacks or M&A, is increasingly seen as a foolish strategy rather than a wise use of cash. Around 16% of those polled said buybacks and dividends are too high given the economic backdrop and the need to husband cash, the greatest percentage since March 2009.
Look, I’ve been a student of the credit cycle and its influence on the economy for almost two decades now. The changing conditions that I’m seeing out there — and that fund managers handling hundreds of billions of dollars of your money directly or indirectly are too — are incredibly important.
That’s why I plan to focus most of my presentations and discussions on the 2016 Money, Metals, & Mining Cruise on this topic and on how to profit in this evolving environment. We’re scheduled to sail on the Crystal Serenity from July 10-17 from Anchorage to Vancouver, with several fantastic stops along the way. If you’re interested in joining me and my fellow market and precious metals experts, call 800-797-9519 or just click here.
In the meantime, understand that the types of investments you want to own in a late-cycle environment are completely different from the types of investments you want to own in an early-cycle environment.
You have to be much more conservative overall, with a higher overall allocation to cash and short-term Treasurys. You have to focus on companies that can generate sales and earnings growth in a weak or recessionary backdrop, such as consumer staples or utilities. And you have to opportunistically use hedges or downside investments to generate profits, because stock markets usually struggle when growth tanks.
Until next time,
P.S. The death of the American dream is coming. Nothing will ever be the same again for you or for your family. The America we know and love will be no more. The fallout of this historic event will be horrific for the unprepared. It will trigger all-out panic — first in the U.S. bond market … and later in the stock market. It will destroy millions of jobs … sentence most Americans to a “dark age” of depression and poverty … send gold and silver prices careening higher … and push the U.S. government to the brink of collapse. Click here to learn how to protect you and your family in the upcoming crisis!