Market Drivers: What’s Next?

TruePoint Capital

The stock market is like that crazy uncle at holiday gatherings everyone is afraid to talk to because you never know what will set him off. These days, it can be anything that sets the stock market off.

Take, for example (Thursday, June 9, 2022); here’s the headline at the closing bell:

“Dow, S&P 500 book worst day in 3 weeks, Nasdaq tumbles 2.8% ahead of key inflation number.”Marketwatch.

What set off the crazy uncle today?

Here’s what drove the markets today:

Investors were nervous about a potential slowdown in economic growth in the wake of the Fed’s monetary policy tightening, with the May consumer-price index report due Friday.

Supply disruptions tied to the pandemic and the war in Ukraine and a revival in consumer demand for services rather than goods have pushed prices up at the fastest pace in about 40 years.

The consumer-price index is expected to show a significant 0.7% increase when the report is released Friday morning — more than double the gain in the prior month.

Monetary policy, inflation fears, and supply disruptions are only a few factors driving the markets. Add to that inflation as one of the recent drivers.

​​Just today, CNBC released the results of a survey it conducted of high-powered CFOs across the country. According to the survey, most CFOs polled (68%) said a recession will occur during the first half of 2023. Not a single chief financial officer surveyed by CNBC thinks a recession can be avoided, citing inflation as the biggest current business risk. Most of the CFOs surveyed also expect Dow to fall to 30,000 during the next recession – representing a decline of 9% from its current level and an 18% decline from its 2022 high.

It’s not just hard economic indicators that can send the markets reeling. In our modern tech world, with information dispersed at the speed of light, the current investing landscape is susceptible to market drivers our parents never had to deal with.

​​The internet and social media are the new market drivers that can turn ripples into tsunamis in the markets – with or without underlying economic variables.

The only certainty about today’s public markets is uncertainty, and an uncertain climate is no climate to invest in.

It’s clear from the nation’s financial elite that a recession is inevitable and will be on our doorsteps sooner rather than later. Recession, inflation, war, supply chain constraints, and more nebulous market drivers like the internet and social media are all putting investors on edge, ready to stampede at the slightest hint of trouble.

Smart investors have an answer to all this market-driven madness. They don’t play the game. You can’t get gored by a bull in Pamplona, Spain if you don’t run with the bulls. The ultra-wealthy don’t run with the Wall Street bulls and bears. They insulate themselves from the madness of market drivers. So, where do they run? What do they invest in?

Smart investors invest in the private markets – with a preference for alternative assets that are ideal hedges against inflation and downturns. What kind of alternative assets are recession-proof and inflation busters?

Not all alternative assets are created equal, and smart investors are very selective about where they put their money – with a predisposition for tangible assets and productive businesses tied to essential goods and services like shelter, food, and fuel.​

​Certain of these essential products even thrive during dire times. Affordable housing, comfort food, and basic hygiene products are examples. By investing passively in these types of assets, smart investors can generate reliable cash flow along with appreciation during uncertain times.

Through passive income that grows with rising prices without losing demand, the ultra-wealthy can shield their income and compensate for any loss of income from job loss or cutbacks.

The ultra-wealthy don’t like uncertainty. It’s unprofitable and gives them headaches and anxiety – the same anxiety plaguing the markets right now.

​​Smart investors thrive on certainty. They don’t speculate and leave their fortunes to chance. They don’t wait around for the next shoe to drop. What next? Another pandemic? War in another part of the world?

​​To the smart investor, it doesn’t matter what market driver will influence the markets next. That’s because they don’t play the same game. They avoid the susceptible public markets – turning to the insulated private markets instead.