One of the biggest concerns for metals investors is whether we are in a recession recently, how long it will last and how investors should react when it comes. After all, Jack Welch, former chairman and CEO of General Electric, once said, "Never miss an opportunity like a recession."
Which Stocks Perform Well After a Recession?
Once the economy entering the recovery phase and consumer confidence growing, the best-performing stocks in the market tend to be associated with sectors like technology, finance, consumer goods, industrials, materials and energy. According to a Royal Bank of Canada research report, the consumer (i.e., automobiles and appliances), materials and industrial sectors are often referred to cyclical industries because they are so closely tied to the fortunes of the economy. Once demand begins to improve, manufacturers begin to deplete their inventories, which in turn "necessitating ordering metals, chemicals and other materials to produce more goods for sale."
Will there be a recession in 2023 or 2024?
Predicting a recession is not a simple issue. While continuous interest rate hikes from Fed raised the likelihood of a recession once again, there are some extenuating circumstances that make a deep recession less likely to happen, including the relatively low unemployment rate in the United States. Marc Lichtenfeld, chief earnings strategist at the Oxford Club, said it's hard to have a recession when everyone has a job and is getting paid more.
According to a Bankrate survey of economic experts on July, there is a 59% chance of a recession by July 2024, declining from the 64% chance of a recession by the end of 2023 predicted in the firm's last quarterly survey.
Did Buffett predict a recession?
In fact, Buffett rarely issues some direct predictions and prefers to note that "nothing is certain tomorrow, nothing is certain next year; nothing is certain in the markets, business forecasts or anything else."
However, on May, 2023, while addressing shareholders at Berkshire Hathaway's annual general meeting, Buffett said that businesses will face a "different climate" as demand cooling. He noted that many Berkshire subsidiaries are seeing their inventories grow, which could lead to lower earnings for those subsidiaries this year. Another move by Buffett that has been interpreted as a sign of a recession is Berkshire Hathaway's decision to sell $8 billion in stock in the second quarter to increase its cash holdings.
How does Michael Burry see the recession?
"The Big Short" Michael Burry has been predicting recessions since early 2023. More recently, nearly 90% of his portfolio's asset allocation is betting on the possibility of a recession. According to a CNN business report in mid-August, Burry's fund, Scion Asset Management, purchased $866 million in put options (i.e., the right to sell an asset at a specific price) on funds tracking the Standard & Poor's 500 Index as well as $739 million in put options on funds tracking the Nasdaq 100 Index.
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