The only certainty about the U.S. economy is its uncertainty. Despite what you see in the stock and Bitcoin markets, all is not well. Uncertainty and volatility are all you can bank on in the public markets.
The social and economic rebound expected by the rollout and adoption of the COVID vaccines was derailed in July by a surge in cases of the COVID-19 Delta variant.
The surge shook investor confidence as the Dow plunged 752 points (2%) on July 19. Since then, the stock market has been on a roller coaster ride. Not to be outdone, Bitcoin has also experienced similar ups and downs – making brief recoveries then only to see gains wiped out the next day.
All is not well with the markets. At the end of July, even Wall Street and investor darling Amazon (AMZN) experienced a setback – missing expectations on revenue and falling short on Q3 guidance – when it reported earnings. It fell as much as 5% since the report and, as of this writing, is down 11% since missing earnings.
Amazon is as sure a thing as anything on Wall Street, especially since having been on a tear since the beginning of the pandemic. One would think the Delta variant would assure Amazon’s continued dominance, but that has not been the case.
The economy can not be trusted right now.
Some would say economic growth is all smoke and mirrors right now – all fueled by trillions of stimulus money dumped into the economy. Stimulus-fueled demand and growth are not the ingredients for long-term recovery because of inflation. Even before the surge in Delta variant cases, there were already kinks in the armor – with signs of a slowing in the economy already appearing.
At least one economist, Andrew Hunter, saw a drag in the economy even before the effects of the variant caused by slowing income growth and surging consumer prices that put a dent in consumer sales.
Typically, the Fed’s response to surging prices is to cool the economy, but the problem is this time is not like any other time before. Inflation is being caused by free money, not a raging economy.
When the economy is strong, unemployment is low, and a Fed move to increase interest rates to cool the economy and rising prices would also increase unemployment. When unemployment is low, the Fed figures a short-term hit to employment is worth the corralling runaway inflation.
The problem the Fed has is that unemployment is not low. Unemployment at 5.4% is still well above pre-pandemic levels of 3.5%. A move to raise interest rates could be detrimental to worker morale with unemployment already high.
The economy has not recovered. Chip shortages continue to plague the auto industry and other manufacturers who cannot meet demand because of a shortage of vehicles due to a shortage of automotive semiconductors.
- Will there be a recession in 2022?
- Will inflation continue to surge?
Don’t wait until 2022 to adjust your investments.
Do what smart investors do and allocate to assets that are always prepared for recessions and inflation.
What types of assets are best equipped to deal with recessions and inflation?
Tangible assets that fall within the essential goods category – goods and services that the public will always need with prices that keep pace with inflation.
There is always demand for affordable housing because there’s never enough of it. Since the Great Recession, demand for affordable housing has consistently exceeded supply, with the gap only getting bigger.
In inflationary times, rents and price growth keep pace with rising prices because demand doesn’t wane. In recessions, to save money, people move in with families or downsize to more affordable housing.
Affordable housing and other essential goods are ideal for handling economic uncertainty because they thrive in any environment. They may not be sexy or trendy, but they stick around, unlike the flavor of the month.
These types of assets you should consider and should be allocated to in preparation for an uncertain 2022. That’s why you shouldn’t wait and should be investing now for 2022.