I’ve had mixed feelings about the ECRI’s various indices over the years (primarily because they appear very highly correlated to equity markets and therefore are difficult to see the value in), however, I have to give credit where credit is due. They’ve been remarkably right over the course of the last decade so perhaps it’s more a case of my ignorance than anything else. Regardless, Lakshman Achuthan was out with a quote in the NY Times this weekend that I thought was pretty interesting. Achuthan, the ECRI’s Chief Economist says investors should wait to see if the economic slowdown becomes more pronounced before buying stocks. He says bonds could be a better bet currently:
“With signs that economic growth is slowing — rattling the stock and commodity markets — the Fed is likely to hold interest rates near zero for months, he said, and Treasury yields are likely to dip even lower, meaning more profits for bond traders.
By this summer, industrial growth will be visibly slowing around the world, said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute, a private forecasting group. The markets have probably reacted to early indications of that slowdown, he said, bolstering bonds and hurting stocks and commodities. “Until there are signs of another pickup in economic growth,” he said, “I wouldn’t be buying on dips in the stock market.” In this context, he said, Treasuries may seem a safer bet.”
I hope I haven’t jinxed their good track record here….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.