Investing in an Economic Downturn

by Greg Silberman of Atlanta Capital Group, 12/2/19

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”. – Warren Buffet

Whenever I come across pessimists bemoaning the current investment climate, I repeat this mantra to infuse positivity in my world view, especially where it applies to finding investment opportunities.

To be honest I don’t even see what they are complaining about, the Dow is touching new heights, the real estate sector hasn’t seen such a drop in foreclosures since the early part of this century, and the dollar amounts being invested in industrial innovation is at an all-time high.

Yes, there is a downturn in the Global economy, numerous factors are combining together in what seems like a perfect storm of negativity to depress the global economy and quell even the hardiest of investors from any attempts at risk taking. Nothing could, or may I say should, be farther from the truth.

The Situation So Far:

The Trade wars may have been a gut punch to the Chinese economy, but it also had a domino effect that resonated across the globe; Asia, Europe and even the U.S. were affected causing a world-wide economic contraction. Post President Trump’s call to equalize export/import imbalances between China/U.S., more and more of the world’s populist leaders followed suit by calling for the same simplistic yard stick to rally their own core supporters.

Multilateral trade deals between countries are becoming even more complex and unwieldy by the day as every country wants to export but none are interested in importation of goods. The JCPOA is on its last legs with Europe unable or unwilling to find a work-around; in short protectionism seems to be the order of the day.

Industrial output and the global economy is so badly hit that the ECB has tried to boost spending by undertaking a Negative Interest Rate Policy (NIRP) by pushing its benchmark interest rate below zero. The ECB was swiftly, if reluctantly, followed by the Central Banks of Japan, Sweden, Switzerland and Denmark once fears of mass withdrawals proved to be unfounded. By mid-2019 over $17trillion worth of negative investment vehicles had been issued – investments that will yield a return less than the original amount invested - Britain, still a part of the E.U. is set to follow suit, and if and when the Fed reduces interest rates, the malaise is set to cross the Atlantic.

However as a counterpoint the age of climate change innovation is upon us. The numbers of companies that are looking to offer products that minimize carbon emissions are at an all-time high. A necessary part of this is replacing existing equipment, which means eco-conscious consumers are buying in.