As economists and financial advisors continue awaiting an impending recession, investors plan their next money moves as the end of the year approaches.
A lot of what economists have feared has not yet come to pass. The labor market remains strong, which, according to Forbes Advisor, represents a hope that the economy could have a “soft landing.” That would mean the U.S. Federal Reserve manages to stem inflation without causing a recession.
“We believe that a recession is inevitable, but we have been surprised by the resilience of the consumer and although there are some signs of weakening there given extremely low unemployment rates and robust economic growth, we think the economy and the market have further to run and that the recent equity weakness is just a pullback in a bull market and not the beginning of the next bear market,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told Forbes Advisor recently.
The U.S. government also managed to avoid a shutdown, so far, but the budget will be revisited in mid-November. However, as Forbes Advisor pointed out, a government shutdown doesn’t necessarily hurt the stock market. The last shutdown in 2018 saw the S&P 500 gain 10.3%, with a jump of 23.7% in the 12 months following.
The Fed didn’t increase interest rates in November, but at least one more rate hike could be on the horizon. “Given how on edge the bond market is (as seen by the past few weeks of ever higher long-term interest rates), it would be a big positive for markets if inflation remains at current levels, or even drifts lower, so the Fed can leave rates unchanged for the rest of this year,” Zaccarelli told Forbes Advisor.
Another interest rate hike could drive the S&P 500 lower, which could lead to the recession that many are hoping the Fed can avoid.
Typically, the end of the year and start of a new year is a good time for the stock market, encompassing the famous “Santa Claus rally” that often happens in the week between Christmas and New Year’s Eve.
With these factors in mind, what’s the best advice for investors in November 2023?
I’m a Self-Made Millionaire: These Are the 6 Investments Everyone Should Make During an Economic Downturn
Consider Value Stocks
In times of inflation, value stocks tend to fare better than the rest of the S&P 500, in general. That leaves plenty of potential in value stocks and even larger names that are seemingly undervalued right now.
As third-quarter earnings reports are set to be released, experts at The Motley Fool advised keeping an eye on Disney, Etsy, and Roku — all down since mid-month.
Keep Cash Reserves in U.S. Government Money Market Funds or High-Yield Savings
Financial experts — like Thomas Brock, CFA, CPA and expert contributor at annuity.org — recommended high-yield savings accounts and short-term U.S. government securities in a recent GOBankingRates article. With interest rates rising and a potential recession still looming, it doesn’t pay to tie up your money in CDs or even stocks.
As one Forbes Advisor article pointed out: “Investors concerned about the potential for a U.S. recession can also take a more defensive approach to the market and increase their financial flexibility in 2023 by dialing back exposure to stocks and increasing their cash holdings.”
Don’t Ignore These FAANG Stocks
If you decide to increase your stock market holdings in November, it could pay to look into some larger cap stocks that have shown tremendous yields so far for 2023.
For instance, Apple is up 37.60% and Amazon is up 58.40% for the year. Clearly, neither of these stocks are the bargain they were in January, but experts have indicated there is still plenty of room for growth.
U.S. News & World Report recently pointed out that Apple’s virtual reality headset, Apple Vision Pro, along with the launch of iPhone 15, points to a promising 2024 for the tech giant.
Meanwhile, grabbing Amazon stock before Black Friday and Cyber-Monday rolls around could yield significant short-term and long-term gains.
Re-evaluate Your Portfolio For the Holiday Season
Just prior to the holiday season is a good time to evaluate your portfolio and create a short- and long-term plan of action for your finances. Of course, it’s also a good time to budget for the winter holidays and start saving for the season of increased expenses, if you haven’t already.
It may also be a good time to speak with a financial planner to be sure you’re on track with your retirement savings and other financial goals, putting yourself in a positive mindset in advance of 2024.
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This article originally appeared on GOBankingRates.com: 3 Best Pieces of Economic Advice for Investors in November 2023