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7/29/16

Global Economy: Economic Recession in 2017 -

Next year, we will see a recession.

I’m calling it.

Why? Well … there are just too many events unfolding this year that will set the stage for a recession, including a corporate earnings recession, a growth-stunting Brexit vote and a U.S. presidential election unlike any we have ever experienced.

Any one of these events could be the direct catalyst for next year’s recession, or it could be one of the many other reasons not listed.

While I can’t predict the exact catalyst for the event, I do know that I’m not the only one expecting the worst.

In fact, according to a recent report, companies are preparing for a recession as well … and you should be doing the same.

In the latest durable goods advance estimate for June, orders tumbled 4% versus expectations of a 1.7% decline. Durable goods orders represent orders for products that last typically for at least three years, like appliances, office equipment, motor vehicles and turbines.

Earlier this month, I explained how declining durable goods orders mean that the Federal Reserve’s hands are tied, and that interest rates are not going higher by any meaningful degree for at least another decade.

This remains true, but you also have to be prepared for the inevitable — a recession.

Your takeaway here is simple: Prepare for a recession-like investment environment.

That means you want to own safe-haven stocks — think gold-related stocks, utilities or telecommunication companies, bonds and even some blue-chip stocks.

But the main thing you want to consider, if you haven’t already, is to find a strategy for profiting from declining stocks.

Depending on how you manage your money, this can be easy to do. If you are managing your own portfolio, a long-term put option on the SPDR S&P 500 ETF (NYSE Arca: SPY) (expiration in 2018 would be ideal) is a simple way to profit from a recession and decline in stocks.

If, instead, you have an adviser who manages your portfolio, tell them you want more bearish exposure, assuming you have little at the moment. It’s your money, and they will listen and help you prepare for the imminent recession.

They should be able to put your investment in some simple bear funds that benefit from a market fall, or they might also consider buying an inverse ETF that returns the opposite of the underlying equity.
Just keep in mind that these positions are used as protection to hedge your portfolio from a crash.

The further we get into 2017 without the expected stock market crash, tilt your portfolio more and more to positions that will rise when the crash hits.

A crash is coming. It’s just a matter of when, not if.

Read more: conomic Recession in 2017 - ValueWalk

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