Exchange traded fund (ETF) and other investors won’t like this: the National Bureau of Economic Research confirmed today that the United States entered a recession one year ago.
Most Americans have already believed this about the economy, but it’s still unwelcome news. Declaring a recession can take awhile because the final readings on a variety of economic measures need to be taken, reports Chris Isidore for CNN Money.
What should investors do now? It’s never too late to implement an exit strategy, if you’re among those who have stayed in and are tired of seeing portfolio declines.
Here’s a suggested simple plan for coping that’s easy to follow, will help stop the bleeding and helps to remove emotions from the process. If you follow this, you’re not bailing entirely on your portfolio, you’re just taking steps to protect yourself in case the market continues south:
- Sell one-third of your invested equity positions now.
- If the remaining two-thirds decline 5%, sell another third.
The Dow Jones Industrial Average sank at times more than 500 points, as investors are simply not sold on solid holiday retail spending this year, reports Sara Lepro for Associated Press. Although retail sales came out better than expected by analysts’ measures, this isn’t enough to send any shot of confidence through the markets. Black Friday sales are not enough to make up for the entire month.
Christopher S. Rugaber for Associated Press reports that the manufacturing barometer shows activity fell to a 26-year low in November, a consecutive drop for 12 months. Analysts were calling for a reading of 38.4, but instead got a reading of 36.2 for November. This is the lowest since November 1982, the time of a dark recession for the economy in the United States.
Another indication of a deep recession for the economy lies in the construction spending that fell in October. A major loss in homebuilding is another result of the economic slowdown, and has fallen at a steady beat for the past two and a half years, reports Martin Crutsinger for Associated Press.
The Institute for Supply Management said its gauge of manufacturing activity fell to a reading of 36.2 in November, a 26-year low.
- Industrials Select Sector SPDR (XLI), down 40.1% year-to-date
The continued downward momentum of oil is validated by the 26-year low in manufacturing activity in the U.S. The numbers are worse than expected and OPEC has not announced a production cut of crude earlier than the next meeting, three weeks away, reports Mark Williams for Associated Press.
Light, sweet crude for January delivery fell nearly 7%, or $3.67 to $50.76 a barrel and set at $54.43 as of Friday.
- PowerShares DB Oil ETF (DBO), down 35.5% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.