Patrick Iturra Report, EIG Asset Manager
The recession is rising, and some stocks are falling, but I am here to guide you to make the most out of this opportunity. I am here to talk about growth stocks.
Right now, the stock market is showing a downward trend; I think this is the right time to assume that the US economy will have a recession by the middle of 2022.
This might lead you to think that there are tough times ahead, but here are three reasons for you to not worry:
- The probability of a recession is less than 10%, which is low in reality.
- Stock prices do not decline with a steep fall whenever a recession happens, which would be somewhat similar to today’s levels.
- All recessions come with once-in-a-lifetime or decade investment opportunities in the stock market. It is perfectly positioned to capitalize on all investment opportunities.
The risks are higher whenever there is a recession and stocks fall! Most investment advisors are bullish on growth stocks right now.
Over the period, we have seen that the crisis has generated opportunities. The same will happen again, and some of these opportunities can be a multi-bagger!
Therefore, you should try to make the best returns of your life! The Best point about the current market recession is that you can buy and build a portfolio of growth stocks that will generate your returns in the long run.
In the following section, I will mention everything you need to know about investing in growth stocks at this time.
Keep track of the Stock Price graph.
The recent price graph looks scary to many people, as the declining prices indicate a recession on the way.
The pricing curve looks flat, but keep in mind that the price graph is going flat means there is a recession upcoming.
A price curve followed 4-6 occurrences in the past year. Many of these occurrences are not followed along with the yield curve.
In the past, the inversion was averted by the federal reserve to cut down the interest rates, but they cannot do this right now because the interest rates are at zero.
This time, despite the return graph becoming flat, the federal will increase the interest rates. All such unprecedented actions were expected to happen in Europe as there is a war going on combined with the decade-high inflation.
All these circumstances show that the recession can be averted by interest rate hiking from the federal reserve to ease the geopolitical tensions in Europe.
How much can the stocks fall?
The growing recession might make you think that the recession and market downfall are side by side. But the reality is quite different. You have to know that normal recessions do not lead to bear markets.
For this, we need to go back to history; During the early 1980s; The US recession led to a 15% decline in stocks. Then, in the 1990s, the recession led to an 18% fall in the price of the stocks.
The 2000 recession led to a 40% market collapse, whereas in the 2008 recession, the stocks went down by 50%
But there are more details because, during the 2000s recession, the markets suffered from a gross overvaluation. On the other side, S&P 500 traded with 26 times forward earnings, and the treasury returns were above 5%.
Comparing this today, there are 19 times forward earnings, and the treasury yield is below 2%. Today the market valuation is lower than that of the year 2000.
One more thing that we have to note is that in the year 2008, the United States financial system was about to collapse. Most of the banks were not able to hold adequate cash. The interest rates were very low, but we do not have the 2008 crisis again, that’s for sure!
Now, we are heading into a recession, but it will be like the 1980s and early 1990s, where the stocks dropped down to 20%.
The S&P 500 index is more than the record 10% highs. Therefore, history says that whenever the stocks fall by 5-10%, We have to go further on the downside, which is the right time to buy stocks.
All Growth stocks will increase as soon as the crash passes
Yes, the growth stocks are going to rise after the recession passes. This is the reason why most investment advisors are bullish on over-investing in growth stocks.
One group of stocks that you can invest in is tech stocks.
Remember that technology will stay over time, and you have to make the most of it!! Look for solid growth companies that will grow their revenue/earnings over time in the next few years.
The growth lines will continue to go up in the long run, and growth charts will go up with high stock prices.
This is why it is recommended that you should invest in growth stocks today. Eventually, the stocks will rise, and you will make a profit.
Identify the opportunity in the Growth Assets.
There is a recession in coming, but there is a significant opportunity to profit from growth assets.
Keep in mind: It is the time of crisis, where some of the best investment opportunities come into the market. The stock market has always been like this, and you should capitalize on the same.
I hope this blog will help you make the most of this upcoming recession. This was my attempt to educate you about a future investment opportunity.
Over the past 24+ years, I have worked as a strategic investment advisor for my clients worldwide.
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