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Profiting During a “Bear” Market

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I am always eternally bullish about long-term investing. With proper asset allocation that is both strategic and tactical, our clients mostly are profitable over time and in the “black” with positive, sometimes amazing returns. 

We are living through some interesting times, albeit short-term considering we have elections with consequences every two to four years, depending on the office. Plus, our economy has short-term cycles that can be sometimes euphoric and sometimes painful.

Interest rates are moving upward, putting downward pressure on the Bond Markets. The housing markets are cooling a bit as mortgage rates are moving back up to traditional levels. 

Downward pressure has forced the stock markets to move into “bear territory” with many companies in the tech field down by 50% to 70% just in the last six months. The news about the actions of the Federal Reserve (The Fed) is all about constricting the flow of money which may cause a recession, which I believe we have already been in for most of 2022.

We live in a creative and capitalist world. The financial industry is adjusting by bringing out new products that can protect your downside while providing income and stability. I want to share a few ideas with you without mentioning specific companies or their new products, as these would be private conversations we have together. These products can be both complex and confusing.

The “Structured Notes” Strategy

One Investment Vendor has “Structured Notes” that work similarly to Zero Coupon discounted bonds. 

A client could own a structured note that could pay up to 8% per year for eighteen months, which is fantastic. The downside would be that these are callable and you may, yet unlikely, participate in some downside should the underlying index or equity drop by more than 30% at any time from today’s level. 

These are 18-month notes.

Several annuities have structured their products to give 10% or 20% downside protection per year and lock in annual gains.

These could be great for upside potential while limiting downside risk. These do not come with the additional annuity fees that can be associated with variable annuities. However, the downside is that these products can “lock up” your principal for six years or so with surrender fees. Additionally, they can be considered to be “less risky” than traditional, full market exposure.

Confused? I understand. I invite you to call me, zoom with me, or meet with me, to see if these new products will fit your needs. Remember that all investing includes some level of risk, and I want to ensure you fully understand the ups and downs of specific investments. 

Have a great July 4th weekend, and God bless America.

Expert Insights

Elliot Kallen Signature 5

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