How to pro­tect your­self be­fore a pos­si­ble re­ces­sion

The Morning Call - - NATION & WORLD - By An­thony Sala­m­one

Wed­nes­day’s news about the in­verted yield curve on bonds and how that’s pre­dicted past re­ces­sions sent the investment com­mu­nity in a tizzy.

Econ­o­mist Kam­ran Af­shar with DeSales Univer­sity pointed to it as a pos­si­ble prog­nos­ti­ca­tor af­fect­ing the Le­high Valley eco­nomic cli­mate. In his quar­terly Busi­ness Sen­ti­ment In­dex re­leased Wed­nes­day, he noted the yield curve and trade ten­sions as af­fect­ing stocks, which can lead to a down­turn.

On Wed­nes­day, the yield on the 10-year Trea­sury briefly fell below the two-year yield. Such a thing is rare: In­vestors usu­ally de­mand more in in­ter­est for ty­ing up their money in longert­erm debt. When yields get “in­verted,” mar­ket watch­ers say a re­ces­sion may be a year or two away.

To be clear: A re­ces­sion is not sched­uled to hap­pen this week, this month or even this year. But one is pos­si­bly a year or two down the road, econ­o­mists say.

But if you, like most of us, are an av­er­age in­vestor — that is, you save and put your retirement nest egg in the hands of investment ad­vis­ers — what should you do to pro­tect your in­vest­ments? We asked and re­ceived re­sponses from sev­eral Le­high Valley ex­perts.

David S. Coult, cer­ti­fied fi­nan­cial plan­ner and pres­i­dent of Mile­stone Fi­nan­cial Associates in Ma­cungie

First: Con­sider or re­con­sider your long-term investment plan. The big thing is if you have money in­vested in stocks that you would need in the next five to seven years, that could be a prob­lem. You could con­sider sell­ing that stock now. Also, stocks that are more de­fen­sive in na­ture (think re­li­able, so-called blue chips), such as util­i­ties and phar­ma­ceu­ti­cals, tend to per­form bet­ter dur­ing a down­turn.

Gene Dick­i­son, owner of MTM Fi­nan­cial Group in Lower Nazareth Town­ship and host of “More Than Money” on ra­dio and tele­vi­sion

Check your investment strat­egy to see if it still fits. If it’s yes, don’t do any­thing. You ride it down, you ride it back. If it’s not, then re­al­ize that in­vest­ing in the stock mar­ket is a dim­mer switch, not an on-off switch. You could be 20% in stocks; you don’t need to be 100% or zero. Look care­fully at fixed in­come in­vest­ments (bonds or short-term cer­tifi­cates of de­posit), which will be largely in­su­lated against a down­ward turn.

Connor J. Dar­rell, head of in­vest­ments at Valley Na­tional Fi­nan­cial Group, Hanover Town­ship, Northamp­ton County

Have an emer­gency re­serve. We typ­i­cally rec­om­mend keep­ing about six months of rou­tine liv­ing ex­penses in a money mar­ket or sav­ings ac­count, even dur­ing times of pros­per­ity. This can help to man­age any dis­rup­tions to cash flow that may come about from a pe­riod of eco­nomic weak­ness.

Danielle Kul­nis, vice pres­i­dent of pri­vate bank­ing, Peo­ples Se­cu­rity Bank & Trust

In volatile sit­u­a­tions like this, what I typ­i­cally en­cour­age peo­ple is to talk to their fi­nan­cial ad­viser. Their ad­viser is in the best po­si­tion to guide them; they un­der­stand their goals. Hav­ing some­body along­side of you mak­ing de­ci­sions, be­cause they can see things you don’t, and that’s what they do for a liv­ing.

Other com­ments from the ex­perts in­clude:

Stay di­ver­si­fied

Stay in the know, but don’t ob­sess over one day’s doom Don’t panic

Morn­ing Call re­porter An­thony Sala­m­one can be reached at 610-820-6694 or asala­m­[email protected]


A board above the trad­ing floor of the New York Stock Ex­change shows the clos­ing num­ber for the Dow Jones in­dus­trial av­er­age, Wed­nes­day.

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