The recent failures of Silicon Valley Bank (SVB) and Signature Bank represented the 2nd and 3rd largest bank failures in US history, respectively. For many, this triggered unsettling memories of the 2008-2009 Great Recession, when bank failures wiped out trillions in household wealth. The ripple effects from that Global Financial Crisis have been so long-lasting that only ~23% of Americans have a written retirement plan today. Still, those who do, have a traditional portfolio of stocks and bonds, subject to the ups and downs of market volatility. Many of our investors reach out to us for help to balance that and because BENA Capital was founded on the principle that it’s possible to invest with peace of mind AND grow wealth – by being debt-free.
Last month, Sung Won Sohn, professor of finance and economics at Loyola Marymount University announced that we were in a “rolling recession.” What does that mean? While a normal recession hits all sectors of the economy at roughly the same time, a rolling recession means some industries are expanding while others contract. In the latest Chief Economists Outlook from the World Economic Forum, 2/3 of respondents said that we are likely to see a global recession this year, while 1/3 said it was unlikely. Then last week, the Fed raised interest rates for the 9th time in a row in an effort to cool growth and tamper inflation here in the US. Meanwhile, the collapse of SVB and Signature Bank ramps up the risk of a recession and will likely mean tighter credit conditions for both households and businesses. All the different variables at play with growth in some areas and shrinkage in others means that the extent of these effects and overall market outlook remains uncertain.
In today’s turbulent capital market environment, with some signals pointing up and others down, experienced investors are looking to limit risk and preserve their capital. Those who have invested wisely and who have managed their assets (and their debt) efficiently will weather the storm. Those with healthy asset financials and capital reserves who are well-positioned to strike when new opportunities arise will emerge stronger. Conversely, those who have chased high risk scenarios, especially those who are over-leveraged, will be even more exposed and will risk losing their assets.
Investing in debt-free funds – like the ones BENA Capital offers – protects your portfolio from downside risk. It is a solution for investors looking to diversify, for passive income with a lower risk profile, for shelter from volatility. While returns may be lower than leveraged funds in times of economic expansion, it can provide stable income and the benefit of safe haven when the outlook is tenuous or when the economy contracts.