Did you know that more than 60% of mutual fund managers fail to beat the market over the long term?

Passive investing, such as through index funds, can often yield better results than trying to pick individual winners.

Here’s what you’ll find in this issue:

• Goldman Cuts Its Recession Odds – Why The Firm Sees A Smaller Chance Of A Downturn: First, we’ll discover why Goldman Sachs sees a lower chance of a U.S. recession in the coming months 🤔

• U.S. Stocks Are Acting Like RINOs (And Not The Political Ones), Goldman Strategist Says: Next, we’ll learn about the recent stability in U.S. stocks, described by a Goldman strategist as “Recession in Name Only” 🦏

• Mutual Fund Investors Are Missing Out: Finally, we’ll explore why mutual fund investors often underperform the funds they invest in 📉

This issue aims to provide you with critical insights that can help you navigate the markets with more confidence and less emotion. Keep on investing!

Goldman Cuts Its Recession Odds – Why The Firm Sees A Smaller Chance Of A Downturn 🤔

According to Goldman Sachs, there’s now just a 20% chance that the U.S. suffers a recession over the next 12 months.

“The data released since August 2—including retail sales and jobless claims this week—shows no sign of recession,” Goldman’s team of economists wrote in a note to clients last Saturday.

Goldman has previously raised its recession probability to 25% earlier this month, citing weaker-than-expected July jobs numbers.

Before that, the economists had been pegging the chances of an economic slump at 15% for nearly a year.

They said they would probably cut their odds back down to 15% if the August jobs report, set to be published on September 6, “looks reasonably good” 📈

The apparent robustness of the U.S. economy will also likely encourage the Federal Reserve to take a more cautious approach to lowering interest rates, according to Goldman’s team.

The economists said they’re now “more confident” that the central bank will slash borrowing costs by just 25 basis points when its next meeting ends on September 18, although they added that a weak August jobs report could put a jumbo-sized 50-basis-point cut back on the table.

U.S. Stocks Are Acting Like RINOs (And Not The Political Ones), Goldman Strategist Says 🦏

RINO is usually a pejorative — meaning “Republican in name only” — used to label those GOP lawmakers who find themselves misaligned with the party’s conservative ideology.

In a note, a Goldman stock strategist, Scott Rubner, said U.S. stocks have “acted like a bunch of RINOs (Recession in Name Only)” since August 5, when the S&P 500 posted its worst single-day loss since 2022.

While markets tend to be more volatile during economic downturns, markets have instead entered a period of relative stability since the yen carry trade blew up two weeks ago.

We’ve entered a period of relative calm which aligns with stock traders going on their two-week summer vacations ahead of the Labor Day holiday in the U.S. ☀️

The situation has now opened up a four-week-long trading window when little is likely to go wrong — until September 16, when markets traditionally start to turn lower.

A combination of re-leveraging by trend-tracking CTA funds, unwinding of put options, and corporate buybacks could fuel markets over the coming month.

In the aftermath of one of the largest unwinds in recent history, this is likely to see a rebalancing that will also be taken advantage of by top companies looking to buy back shares 💰

However, the second half of September is historically the worst two week trading period of the year.

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Mutual Fund Investors Are Missing Out 📉

Over the past decade, the average mutual fund has delivered average annual returns of 7.3%.

But Morningstar, which tracked money moving into and out of funds, found actual fund investors didn’t do nearly so well.

They realized annual returns of 6.3% on average.

It’s a difference that can add up to tens of thousands of dollars over the years the typical investor saves for retirement 💲

It’s largely due to bad timing.

Investors tend to buy in when stock prices are high, and economic optimism is widespread.

They often cash out during bear markets, when they fear being overwhelmed by losses.

Overwhelming evidence indicates that a volatile market leads investors to engage in panic selling and a rising market leads investors to engage in exuberant buying.

The average bear market lasts 289 days, or about 9 ½ months.

The key is to ride it out, and after about six months of a bear market, start adding to your stock portfolio 📊

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