Investment Strategies for a Slowing US Economy

Defensive Sectors for Downturns

Consumer staples, like those offered by Procter & Gamble, are considered defensive sectors during economic downturns due to their consistent demand. Jon Moeller emphasizes the importance of innovating in high-demand categories to sustain growth, while the company's strategy focuses on delivering superior propositions and productivity to navigate economic challenges.

"Jon Moeller: If you just assume for a minute, Olivia, that we’re wrong in the ongoing discussion that we’ve had about consumers being under pressure, and our contention is that that really hasn’t manifested itself as of yet, but just assume that we’re wrong or that that changes going forward, and to your question on innovation, it becomes very important that we’re innovating in categories that are going to become--that are going to see even higher levels of demand, if in fact there’s any kind of consumer downturn." --- (PG, earning call, 2024/Q4)

"We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to" --- (PG, earning call, 2024/Q3)

Growth in Innovation and Technology

Major tech companies like Google, Tesla, Apple, Microsoft, and Amazon are focusing on innovation and technology growth. They are investing in new technologies, improving production efficiency, and leveraging AI and sustainability initiatives to drive future growth and maintain competitive advantages.

"I wanted to know if you could talk a little bit about both the opportunities and the challenges of operating at scale in a time like this where there's a lot of technology innovation going on and how you see the elements of trying to strike a balance towards moving the organization forward while still continuing to both invest for growth as well as balance margins. Thanks so much." --- (GOOG, earning call, 2024/Q1)

"We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors, while our new products will help enable future growth." --- (TSLA, sec filing, 2024/Q1)

"We will continue to make significant investments in this technology and dedicate ourselves to the innovation that will unlock its full potential." --- (AAPL, earning call, 2024/Q3)

"So that's things such as advancing sustainability policy, using our climate innovation fund to invest in innovations into new technology solutions, as well as working with other partners around their sustainability commitments as well." --- (MSFT, Fireside Chat, 2024/08/05)

"During the first quarter, we saw growth in both generative AI and non-generative AI workloads across a diverse group of customers and across industries as companies are shifting their focus towards driving innovation and bringing new workloads to the cloud." --- (AMZN, earning call, 2024/Q1)

Stability through Fixed Income Investments

Fixed income investments offer stability in a slowing economy by providing predictable cash flows and mitigating volatility. However, their performance can be impacted by inflation and market conditions, as seen in recent declines in fixed income activity. Balancing fixed and variable rate debt can further protect against earnings and cash flow volatility.

"Fixed income investments are advantageous in a time of low inflation, but do not protect investors in a time of rising inflation." --- (MS, press release, 2024/04/22)

"Moving to Markets, total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7%, driven by lower activity in rates and commodities compared to a strong prior-year quarter, partially offset by strong results in securitized products." --- (JPM, earning call, 2024/Q1)

"We have fixed assets that mature and pay down, and those supply cash that then gets put back to work on the balance sheet and reprices over time. And we have two basic categories of fixed assets that mature and pay off, and those are securities and loans." --- (BAC, earning call, 2024/Q2)

"This is, I think, an interesting dynamic when you think about the installed base of liquid fixed income investment grade paper that's out in the world that many people invest in." --- (GS, conference, 2024/05/30)

"Our objectives include maintaining a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions." --- (VZ, sec filing, 2024/Q1)

Global Diversification Strategies

Alibaba's platform enables MSMEs to diversify their product sources by connecting with global suppliers and leveraging innovative logistics solutions, helping them navigate the global marketplace more efficiently. This approach supports global diversification strategies, crucial for mitigating risks in a slowing US economy.

"For many business owners who are new to e-commerce, I think AI tools will draw them closer to the platform. MSMEs Have Growing Access to Global Suppliers In addition to a growing suite of innovative solutions to support their businesses, MSMEs on Alibaba.com can diversify their product sources by connecting with suppliers with specific industry and product focuses. These key global digital supply chain clusters include the following:" --- (BABA, press release, 2024/06/27)

"It aims to reshape how SMEs manage their supply chain strategies, allowing them to navigate the global marketplace with fewer of the traditional logistics hurdles." --- (BABA, press release, 2024/04/17)

Investing in Tangible Real Assets

Investing in tangible real assets, such as real estate, offers stability and growth potential. Companies like AvalonBay, Prologis, Equity Residential, Simon Property Group, and Public Storage highlight the value of leasehold assets, development portfolios, older assets, and high-occupancy properties, emphasizing their strategic importance in a slowing economy.

"(5) In addition to leasehold assets, there were net other assets of $34,991 as of March 31, 2024 associated with our unconsolidated real estate investments which are primarily cash and cash equivalents." --- (AVB, sec filing, 2024/Q1)

"Please see our Notes and Definitions for further explanation. in thousands March 31, 2024 December 31, 2023 Assets: Investments in real estate properties: Operating properties 75,974,027 75,435,497 Development portfolio 4,362,752 4,367,455 Land 4,072,212 3,775,553 Other real estate investments 5,018,514 5,088,070 89,427,505 88,666,575 Less accumulated depreciation 11,430,899 10,931,485 Net investments in real estate properties 77,996,606 77,735,090 Investments in and advances to unconsolidated entities 9,691,101 9,543,970 Assets held for sale or contribution 382,793 461,657" --- (PLD, press release, 2024/04/17)

"But, boy, the stock looked good at that price. The ability to fund it with 30, 35 year old assets that, you know, from our point of view, did not have as desirable a path forward as our remaining 300 assets felt like a great decision." --- (EQR, conference, 2024/06/04)

"For additional information, see footnote B. Simon Property Group, Inc. Unaudited Joint Venture Combined Balance Sheets (Dollars in thousands) June 30, December 31, 2024 2023 Assets: Investment properties, at cost $ 19,140,474 $ 19,315,578 Less - accumulated depreciation 8,955,109 8,874,745 10,185,365 10,440,833 Cash and cash equivalents 1,196,158 1,372,377 Tenant receivables and accrued revenue, net 450,435 505,933 Right-of-use assets, net 110,547 126,539 Deferred costs and other assets 570,976" --- (SPG, press release, 2024/08/05)

"With the non-same store assets at 81% occupancy in the quarter, we have confidence in outsized growth from that pool to come this year and into the future, which is a segue to our outlook for '24." --- (PSA, earning call, 2024/Q1)

Comprehensive Risk Management

Major financial institutions like Goldman Sachs, Bank of America, and Citigroup emphasize comprehensive risk management frameworks, integrating risk assessment, monitoring, and management across various risk types. BlackRock highlights the growing demand for integrated investment and risk technology solutions, underscoring the importance of holistic risk management in today's investment landscape.

"Accordingly, we have established an enterprise risk management framework that employs a comprehensive, integrated approach to risk management and is designed to enable comprehensive risk management processes through which we identify, assess, monitor and manage the risks we assume in conducting our activities." --- (GS, sec filing, 2024/Q2)

"We take a comprehensive approach to risk management with a defined Risk Framework and an articulated Risk Appetite Statement, which are approved annually by the Enterprise Risk Committee and the Board." --- (BAC, sec filing, 2024/Q1)

"On the right, we've laid out our comprehensive risk management oversight agenda, covering operations, compliance and strategic risk types." --- (C, event transcript, 2024/06/18)

"We're partnering with clients who are increasingly looking for comprehensive technology solutions across their entire portfolio from risk analytics, investment management and to accounting capabilities. The need for integrated investment and risk technology as well as whole portfolio views across public and private markets is driving durable ACV growth." --- (BLK, earning call, 2024/Q2)

"These systems also provide management with comprehensive information about our aggregate credit risk by product, internal credit rating, industry, country and region." --- (GS, sec filing, 2024/Q1)

Alternative Investments for Diversification

Blackstone leverages its extensive data and global portfolio to strategically invest in alternative assets, focusing on private equity and private markets. Their tailored portfolio construction aims to generate risk-managed, capital-efficient returns, providing diversification and capital preservation, crucial for navigating a slowing US economy.

"This should be very positive for Blackstone's asset values and provide the foundation for a significant realization cycle over time. As the largest alternatives firm in the world, with nearly $1.1 trillion of AUM, the real-time data collected across our global portfolio provides insights that help us decide in which areas to concentrate our investments." --- (BX, earning call, 2024/Q2)

"GP Stakes targets minority investments in the general partners of private equity and other private market alternative asset management firms globally, with a focus on delivering a combination of recurring annual cash flow yield and long-term capital appreciation." --- (BX, sec filing, 2024/Q2)

"a portion of their liquid IG portfolios to private markets. Alternatives have taken meaningful share of public equity portfolios over the past 30 years but little on the fixed income side." --- (BX, earning call, 2024/Q1)

"Through this platform, we provide our clients tailored portfolio construction and strategic asset allocation, seeking to generate risk-managed, capital-efficient returns, diversification and capital preservation that meets clients’ objectives." --- (BX, sec filing, 2024/Q2)

"Alternatives have taken meaningful share of public equity portfolios over the past 30 years but little on the fixed income side. In the" --- (BX, earning call, 2024/Q1)

Cash Management and Liquidity

Major financial institutions emphasize robust liquidity risk management to meet cash flow and collateral needs under various economic conditions. Strategies include holding excess reserves, improving loan mixes, and deploying excess liquidity opportunistically, ensuring they can support business operations and customer needs effectively.

"LIQUIDITY RISK MANAGEMENT Liquidity risk is the risk that the Firm will be unable to meet its cash and collateral needs as they arise or that it does not have the appropriate amount, composition and tenor of funding and liquidity to support its assets and liabilities." --- (JPM, sec filing, 2024/Q1)

"Liquidity Risk Funding and Liquidity Risk Management Our primary liquidity risk management objective is to meet expected or unexpected cash flow and collateral requirements, including payments under long-term debt agreements, commitments to extend credit and customer deposit withdrawals, while continuing to support our businesses and customers under a range of economic conditions." --- (BAC, sec filing, 2024/Q2)

"Simply put, companies to open bank accounts, make payments to employees and suppliers, collect money and manage their cash to support these flows. Liquidity management sits at the center of the commerce cycle." --- (C, Investor Day, 2024/06/18)

"Deposit rotation and rate paid have stabilized. Loan mix has improved. Our fixed asset repricing -- earning asset repricing continues to march on, and we've been opportunistically working with the investment portfolio to deploy excess liquidity. So, if you think about some of these things going forward, the higher and lower end of the range, I'd say a couple different things." --- (USB, earning call, 2024/Q2)

"We all hold excess reserves. We don't necessarily lend those the way we used to in the Fed funds market, because you if you're a borrower, you don't get credit for the liquidity." --- (PNC, conference, 2024/05/29)