Lately, the top three headlines we see daily when scanning the business section are:

1. Inflation/Recession
    
2. Interest Rates
    
3. Emergency Measures Act Inquiry

When topics are on page one day after day they are usually more than likely there because people are interested in reading about them, but that does not mean they are the driving force for long-term investment returns. They are current distractions that, from a historical standpoint, are typically mostly priced in to the market.

The real stories are on page 16, but most people do not make it that far - by the time investors have skimmed the first few pages; depression, frustration, angst, or some combination thereof, kicks in.

The chart below is a survey of professional fund managers who collectively manage $650B+. The peaks circled in red show the percentage of them that think a recession is likely, which is currently at about 58%, almost as high as April 2020 (COVID) or March 2009 (the Great Recession).
 

We would like to make four points:

• Historically, when the majority of fund managers say recession is coming they are generally correct.
   
• For the families we work with that make their home and living in Alberta, the 2009 recession mostly never felt like one as the energy sector and, by association, the province’s economy were strong. The same is true today thanks to a strong energy sector (relate that to your business).
   
• For the rest of the families we work with in other parts of the country, or if you are retired, higher energy prices are a rising cost in your life but do not dominate your spending.
   
• Although these fund managers have been correct about calling recessions in the past, and as the odds rise daily that we will get an “official” slowdown, the missing highlight is that when fear peaked previously it represented substantial buying opportunities and provided outsized forward returns from stocks. Think April 2020, and March 2009 as well.

We understand that most people do not want to hear this information, and that fear sells more than rationality, but these are the historical facts.

To summarize:

• Keep your near-term spending in cash
   
• Invest your long-term capital in stocks
   
• We do not know where the bottom is and you don't need to find it (so stage in with new long-term capital)
   
• Do not speculate with the milk money

Randy and Ian

Chart source: BofA Securities, BofA Global Research - Global Fund Manager Survey, Les Miserables, September 13, 2022