Fat Tail Investment Research - Inflation, Bear Markets, and Recessions: What Should Investors Know

Investors Are Wondering How to Navigate This Bear Market

MELBOURNE, Australia, Nov. 7, 2022 /PRNewswire/ -- Financial publisher Fat Tail Investment Research's latest research guide on surviving bear markets and recessions argues that investors have room to manoeuvre, provided they understand historical precedents.

Fat Tail's investment guide notes that the recent difficulty navigating markets is exacerbated by the fragility of global economies rocked by rampant inflation.

Investors have spent much of 2022 wondering how to protect their investments from high inflation and bear markets. With global stock markets yo-yoing, investors have found navigating this volatility difficult.

Over the year to September, for instance, the CPI inflation rate in Australia hit 7.3%, the highest in more than three decades. Philip Lowe, the governor of the Reserve Bank of Australia, bluntly admitted that inflation in Australia, as in most countries, is 'too high'. In the UK, CPI inflation rose 10.1% in the 12 months to September 2022, a 40-year high.

In the US, minutes from the Federal Reserve's Open Market Committee September meeting revealed Fed officials are fretting over inflation that remains 'unacceptably high', with inflation data coming in above expectations.

Taming inflation is proving difficult for central banks worldwide. This has come with repercussions for households and equity markets. Rising interest rates and persistently high prices have hit household budgets and dampened corporate earnings. And rising bond yields have made some riskier assets like tech stocks less appealing. Unsurprisingly, the tech-heavy US Nasdaq Index is down more than 30% year to date.

With the exuberance of the pandemic-led bull run over, emphasis has switched from capital appreciation to capital preservation. As a result, Fat Tail Investment Research is seeing the same questions nagging investors. Should one flee to cash or persevere in stocks? How do recessions affect equities? How long do bear markets last? How do interest rates influence asset prices? Can one profit during bear markets?

Fat Tail says it prepared its latest guide with these questions in mind, hoping to soothe investor worries while stressing the importance of risk management as a foundational principle of sound investing.

'It always pays to understand market risks and have protective strategies in place. Whether a threat is imminent or distant, sound investing should always involve some form of risk management,' wrote Fat Tail's Kiryll Prakapenka.

To navigate today's volatile markets, interested readers can access Fat Tail's latest investment guide on bear markets and inflation here.

About Fat Tail Investment Research

Fat Tail Investment Research is one of the largest independent investment research companies in Australia, with 100,000 daily readers of its e-letters and 30,000 paying subscribers. Fat Tail's team of editors and researchers hunts emerging investment ideas yet to gain widespread coverage from the financial press and institutional investors. Its vision is to empower investors to make intelligent investment decisions and protect their wealth.

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focused on investigating the biggest investment trends. Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies.