U.S. is in recession, but will it miss Kentucky?
Stuart Hoffman is “110 percent certain” that the nation is in a recession.
Other economists are still avoiding the R-word on technical grounds, but Hoffman confidently declares that the United States has been in a recession “for at least the last four or five months if not longer.”
Unemployment is up, spending is down and personal incomes are falling — that’s a recession, says the chief economist for The PNC Financial Services Group, the holding company for PNC Bank.
“If it walks like a duck and quacks like a duck …,” he said.
But here’s the best part: Hoffman does not think the recession has reached Lexington and Louisville. In fact, it might not get here until 2009, if it gets here at all, he said during an interview in Lexington on Thursday.
The reason is that Lexington and Louisville are college towns with “more stable” housing markets that don’t generally go through the “boom and bust” cycles faced by the rest of the nation. And when we do have a recession, Hoffman said, it is generally shorter than the national average.
He expects the national recession to last another six to nine months or at least through the middle of next year. “For the most part, 2009 will be a recessionary year,” he said.
How will we know when the downturn is ending?
Hoffman and William Stone, PNC’s chief investment strategist, said the stock market might tell us — if we can spot the signs. The market always begins its recovery well ahead of the economy, they said, although the markers might be easier to spot in hindsight than when they occur.
Don’t confuse the economy with the stock market, Stone warned. Different dynamics are at work and the indicators might not be headed in the same direction.
So where should investors have their money now?
Depending on investors’ ages, part of their portfolio should be “high quality” stocks that can often be bought relatively cheaply in a downturn, Stone said.
What’s “high quality”?
Think Coca-Cola, Wal-Mart, McDonald’s, Procter & Gamble and the like — companies whose products or services are used by consumers even in a recession, Stone said. They are companies with “household names” that will be there when the recession ends.
And if you are holding quality stocks that have been beaten down in price, keep holding them, he said. They will recover, although “you don’t know when that will happen.”
“You’ve taken the pain,” Stone added. “You might as well hold on for the pleasure.”
