What Are Other Investors Doing?

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TLDR

Investors are responding to the downturn in many ways. Here is a list of the most common approaches we hear when talking with other TOGGLE users.

Also remember that Fed Minutes come out today.

The Treasury Bull The safe-haven investor is going all-in into Treasuries. They believe that the Fed will be able to hike only so much and are happy to get ~3% from UST 10s and ~3% implied inflation from TIPS.

The Staples Investor Remember when Walmart rallied in Q4 of 2008? The Staples Investor remembers. This investor is pivoting to safe equities like staples, real estate, utilities and possibly energy. Recession or not, we need to eat, to rent and to turn on the lightbulbs. See you at the next recovery, they are confident they will be up.

The Dividend Seeker The Dividend Seeker is close in style to the Staples investor. With a nice drop in markets, dividends are becoming compelling again and the Dividend Seeker is looking for 4%+ dividends to weather the storm

The Call Underwriter The Call Underwriter owns a portfolio of equities and sells calls against it. Like the Dividend Seeker, they want yield. They do not believe equities will appreciate during the downturn, and seek the extra carry provided by selling premium.

The Tech Investor The Tech Investor is the new incarnation of the Staples Investor. Maybe 20 years ago Walmart was the safe choice, but the Tech Investor believes that now it’s Big Tech that is a safe choice. AAPL, GOOGL, MSFT are all infrastructure plays and they’re here to stay.

The Short Seller The short seller believes in doom and gloom and will use inverse ETFs or even put options to stay short the market. “The downturn has just begun, just wait till QT starts!” said one of our most bearish users. Note: QT is Quantitative Tightening, the unwind of QE.

The Cash Hoarder The Cash Hoarder thrived in a time of low inflation and reasonable real rates. Now they are facing a real challenge as real rates for short term bonds are deeply negative, and they are thinking maybe about moving to Japan. Note ‘cash’ here is used as a synonym for T-Bills of 3M or lower tenor.

The Dollar Bull The Dollar Bull knows how markets work during a recession. When the global economy falters, money flows back to the big ole US of A. The Dollar Bull is not unlike the cash hoarder, but they have a cross-currency view of things – and will pounce back on oversold foreign holdings one day.

The Crypto Bull The Crypto Bull has discovered that a popular asset class cannot escape correlation with the equity market. After BTC suffered yet another 60% drop from peak, the Crypto investor is eyeing that $29.7k level from July 2021 and thinking “will it breach or rebound?”.

The Gold Bug The Gold Bug knows that the precious metal is where the buck stops. Come hell or high water, recession or inflation, Gold is the ultimate safe haven. Russia war? High inflation? Recession? Gold is the answer.

Conclusion

There are many valid approaches to invest for safety during a slowdown. If we blend together all these styles we get a defensive portfolio made of Treasuries, High Dividend / Defensive stocks, Gold, some Crypto and a collar (i.e. a sold call and a long put).

toggle user recession portfolio

Idea Spotlight: Merck

Valuation indicators for Merck rose and historically, this led to a median increase in price of 10.89% over the following 6M. TOGGLE analyzed 7 similar occasions in the past to produce the median projection and this insight received 6 out of 8 stars in our quality assessment.

Yesterday, Merck announced that the Board of Directors has declared a quarterly dividend of $0.69 per share. Payment will be made on July 8, 2022 to shareholders of record at the close of business on June 15, 2022.

merck stock performance

Originally Posted on May 25, 2022 – What Are Other Investors Doing?

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