"This is a critical juncture in the economic cycle," argues investment strategist Liz Young. "There's likely a contraction coming because that's what resets the business cycle. We're in late cycle and have been for quite a while."
Young is head of investment strategy at SoFi, personal finance company and online bank.
The former director of market strategy at BNY Mellon Investment Management recommends taking it "one week at a time."
"Wait it out and see what happens through fall and whether or not we get a shakeup," she advises.
In addition to SoFi members, the recipients of Young's insights comprise the general public ("A lot of that is financial advisor-based," she notes), social media followers and listeners to her monthly podcast, "The Important Part."
The majority if members on SoFi's investment platform are young individual investors ages 20 to 40.
In the interview, the chartered financial analyst serves up her forecasts on inflation, interest rate hikes, 2024 corporate earnings and consumer spending.
"If the labor market starts to cool off," she says, "people will get nervous."
Young's early career includes working as a portfolio analyst at Baird and as a research analyst at BMO Global Asset Management.
ThinkAdvisor interviewed Young by phone on Sept. 18.
In today's environment, "getting 5% on a lower-risk investment is a good idea," she opines.
Here are highlights of our conversation:
THINKADVISOR: What should financial advisors be telling their clients right now, in general?
LIZ YOUNG: This is a period where uncertainty is going to increase. We haven't seen the full solution to inflation. We haven't seen the full effects of an [interest-rate] tightening cycle.
There are parts of the market — like money market funds, Treasury bonds, and even some defensive dividend-paying stocks, like utilities and the energy space — where you can get paid to wait and watch what happens.
Getting 5% right now on a lower-risk investment is a good idea.
Wait it out and see what happens through fall and whether or not we get a shakeup.
What are the odds for a wicked October in the stock market?
There's a pretty good chance that something could go wrong in September … [with] inflation having come in hotter than expected.
But I think you need to look at it one week at a time.
The biggest thing to remember is that the amount of time that has passed since the beginning of the interest-rate hiking cycle and since the yield-curve inversion, [is] now right at the time when things usually start to show cracks in the economy.
So this is a critical juncture in the economic cycle.
Do you think that the Fed will announce another interest-rate increase?
They should be done hiking. We need to see what the effects are of the [increases they've already made] before they keep going.
They're going to communicate that they're ready to go again if they have to — if inflation rears its ugly head. But I think the hiking cycle is all but over.
