A recent article in Barron’s shares market insights from Jim Stack, a Montana-based financial advisor whose money management firm is known for its “willingness to reduce stock exposure when markets appear overvalued.”
Here are some highlights:
· On recession risk, Stack points out that “no recession in U.S. history has been forecast in advance by an poll of economists,” adding that investors should instead look for warning signs or “factors that signify it is late in the cycle and one should be pursuing a more defensive investing course”. He cites a flattening yield curve as one such factor.
· Stack refutes what he describes as Wall Street’s view that advisors who adjust their cash positions are attempting to time the markets. He explains, “There have been times when Warren Buffett has had Berkshire Hathaway in a much higher cash position, and no one thinks of him as a market timer.”
· A “blind buy-and-hold approach,” doesn’t work for everyone, Stack contends. For someone nearing or in retirement, he argues, “the last thing they want to have happen is to ride through a bear market like we had in 2008.”
· Stack, who isn’t a fan of indexes, explains, “We want to go out and hand pick those stocks that have the best combination of value and growth and downside risk protection, which of course you can gauge on a stock-by-stock basis. But you can’t gauge stocks when you are investing in an ETF or a mutual fund.”