The stock markets tumbled into the definition of a bear market last month, but that doesn't mean there aren't good opportunities for investors.
A "Seminar and Cocktails" event for clients and potential clients hosted by the LOM Financial Group on 15 June at the Grand Cayman Marriott Beach Resort sought to shed light on some of those opportunities with a presentation titled, "Investment Strategies for a Volatile Market."
Making the presentation for LOM was Chief Investment Officer Bryan Dooley, who travelled from the home office in Bermuda along with Chairman and Chief Executive Officer Scott Lines for the event.
Dooley started by discussing the volatility of the markets – sometimes on a day-to-day basis – so far this year. He noted there have been a lot of "ups and downs" that have fallen mostly on the downside.
"All the asset classes are down," he said. "There's almost no place to hide."
There are numerous reasons for the bear market, Dooley said, including the raising of interest rates by the United States Federal Reserve, the COVID-19 pandemic, the war in Ukraine, the commodity shortage and resulting price increases, the disruption of the global supply chain partially because of China's COVID-19 policies, and the cryptocurrency value collapse.
Dooley said bear markets aren't uncommon; there have been 28 of them since 1928. "But they never last that long," he said. "The average length is 289 days, which is about 9 1/2 months." Although eight of the past 14 bear markets have preceded a recession, Dooley said strong bull markets followed each of those recessions.
Whether or not there's a recession will be largely determined by what the Federal Reserve does in its effort to slow the U.S. economy to control the rampant inflation, Dooley said.
"If they tighten [monetary policy] too much, they'll throw the country into a recession," he said. "They might do that, but they also might not tighten things enough. That will mean we'll have to live with higher inflation, but not as high as it has been."
The goal of the Federal Reserve will be to provide a "soft landing" for the U.S. economy as it tries to stabilise inflation, avoiding a recession.
"Historically, the Fed hasn't been successful in providing soft landings," he said. "We'll have a dip. There's no question that the economy is going to slow. The question is how much. If we do have a recession, hopefully it will be a short one."
Dooley outlined LOM's strategies on market opportunities.
"We think you need to be in companies that are market leaders," he said, noting that these are the companies that provide products or services that consumers will pay high prices for, even if those prices go up.
Dooley said there was opportunity in healthcare industry investments because of the ageing Baby Boomer generation and in companies that produce semiconductors, which are used for in-demand products like mobile telephones, home appliances and electric vehicles.
"There's no bear market in semiconductors now, even in a bear market," he said.
Other avenues for investment return could include dividend-paying companies, short-duration bonds and a Treasury Inflation-Protected Securities, commonly known as TIPS, Dooley said.
Answering questions after his presentation, Dooley spoke about some major companies that saw their stock prices sink because of the disruption of travel caused by the COVID-19 pandemic. Some of them in the travel, hotel and entertainment industries have seen their stock prices remain stagnant since they dropped in 2020.
"To me, that's an opportunity," Dooley said. "These are great companies."
Dooley also answered a question about the anomaly of having the prices of equities and bonds go down at the same time.
"Usually, when equities go down, bonds go up," he said. "But this time around, it's a different scenario. I think it's because we're in an inflationary environment. We haven't seen an inflationary environment like this in a long time."
Cayman Islands Branch Manager Alex Goulden thanked those in the audience for attending.
"Our hope is this will become a biannual investment seminar," he said and then invited attendees to a cocktail reception near the Marriott's lobby bar.
The LOM Financial Group is a publicly held, international financial services company, providing a range of private investment services and products. In addition to its Cayman office in Camana Bay, the Bermuda-based LOM – which observed its 30th anniversary earlier this year – also has offices in the Bahamas and Bristol in the United Kingdom.
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