I’ve yet to find it on a map but with all the talk in the news I’m confident it does exist.

To many investors the prospect of a recession has become very real, so real that presidential candidates have strategically played to the possibility in recent debates.  Investors that heeded warning signs over the last six plus months were able to limit or avoid painful losses to their accounts. 

It hasn’t been proven, however it is probably safe to assume that the number of investors reacting favorably to a shrinking account is nearly identical to the number of TV watchers who enjoy watching campaign commercials.

What does the future hold?  Gold and Oil prices are steadily climbing, the dollar is steadily falling, banks are running out of money, jobs are disappearing, and corporate earnings are slipping.  These reports aren’t usually interpreted favorably by Wall Street, as demonstrated by the Dow Industrials sliding to below early 2007 prices.

The brokerage industry often claims that if an investor’s risk tolerance justifies investing in the stock market, the direction the market is moving is irrelevant.  That’s code for, “I don’t have a clue how the economy works.”

A prominent financial planner recently commented that the weather is easier to predict than the economy.  No one can predict with certainty how the markets are going to behave, but there are enough warning signs that investors should proceed with added caution.  Board up the windows of your portfolio and hope the storm doesn’t hit shore.  Being content with a modest return in the short run may mean missing out on some gains, but the potential for loss is great enough that it may be worth it.

Disclosure