Investors should prepare themselves for a decade or more of lower returns on equities, according to Peter Berezin, chief global strategist and director of research at BCA Research.
The low returns will seem especially conservative when compared to the phenomenal returns investors reaped before the pandemic threw the market for a loop, Berezin said in an interview. BCA Research is an independent provider of global investment research and investment strategy advice with offices worldwide including New York City. The firm takes macro-economic research and turns it in concrete, actionable advice, he said.
Despite some lower returns than investors may be used to, Berezin said that BCA Research is optimistic about the worldwide economy, though there will be headwinds to face over the next decade.
Developed countries, including the United States will experience a mild recession in 12 to 18 months. “The question is not if there will be one, but what the timing will be,” he said. In fact, the market may experience a rally in the short term, “but the economic picture will begin to darken after that.” At the same time. “There is little danger of a serious recession.” Part of the reason the recession will remain mild is because there is not a glut of homes on the market.
Advisors should be helping their clients reduce risk in their portfolios over the next year, Berezin said.
For the banking world, banks are going to want to retain liquidity, which will result in a slowing of lending activity. “Banks are vulnerable right now,” he added. “They will see a benefit of the current economic situation only if their customers stay with them and do not start moving their money around.”
The alternatives investor who has money tied up in commercial real estate or multi-family housing will be challenged in the current environment, he said. Advisors also may want to move clients out of some equities and into long-term bonds, not short term bonds.
“The name of the game right now is getting ready for the next recession,” Berezin said.