Will the stock market crash in 2023? This fund manager says yes

We didn’t even know about him until recently.

However, it seems that he has done enough to at least get worldwide recognition in the field of finance in the year 2022.

Turns out, Mr. Berger, who is a hedge fund manager, was on a roll last year.

At a time when Western stock markets were plunging and investors clutching at straws, Neil Berger and his clients were laughing to the bank.

Reports suggest that Berger’s macro fund, popularly known as the Contrarian Macro Fund, has given an incredible 163% return in 2022.

Yes, you read that right. Even as other fund managers and hedge funds considered themselves breakaway rockstars, Neil Berger went ahead and multiplied his clients’ money nearly 3x.

Given this performance, wouldn’t it be great to delve into the mind of the man and find out how he managed to achieve this feat? It would be even better if we could get some insight on how to handle a rocky 2023.

Well, I scoured the internet and found answers to both questions like how he managed to achieve his feat and what he thinks about the year ahead.

Let’s answer the first question.

According to Berger, the only reason he started the Contrarian Macro Fund was because he anticipated a radical change in the way the US central bank operates.

Here he is…

The reason I started the fund was because the flow of the central bank was about to turn 180 degrees. “This significant gap will be a headwind on all asset prices,” he told Bloomberg.

Simply put, Berger was convinced that pumping so much liquidity into the system, whether it IPOs are coming or getting money out of crypto, it was only a matter of time before inflation raised its ugly head. And when that happened, central banks were forced to intervene in the form of higher interest rates.

This is the 180 degree change that Berger was talking about. From being a substantial liquidity provider, the central bank had to switch roles and now has to clean up completely.

Thus, with the cost of funds increasing and liquidity increasing, the financial markets are having a tough time. This has allowed Berger to rake in profits as he has positioned himself to take advantage of the decline.

To be honest, most of us knew that what the Fed and other central banks were doing was not sustainable and that sooner or later, the chickens of this money printing would come home to roost.

However, to Berger’s credit, he put his money where his mind was and is now reaping the benefits.

Now, on to the all important question. What is Neil Berger’s outlook for 2023 and beyond? Is he now bullish or is he still bearish and thinks it’s going to hurt a lot?

Well, that hurts more and unfortunately, sees a lot of it.

In the words of Business Insider, he expects to hold his short position for years and the predicted pain in the stock market won’t become apparent until markets move sideways for months.

‘Big picture, everything is down below’, Berger’s parting words.

Well, I am with you if you believe that Berger’s approach is applicable to US markets and India will not be affected as badly. After all, both our fiscal and monetary health seem to be in better shape.

However, we are very much in the wheel of this global growth engine. Thus, even if we are not hit as badly as the western economies, there will definitely be some impact on the Indian economy as well.

Given this, what should be your portfolio strategy for 2023 and beyond? Which stocks should we consider buying and which should we stay away from?

Perhaps you need to think a little differently to get satisfactory answers to these questions.

Berger’s goal was to profit from the crash he saw coming from afar. However, as retail investors, we may not have the resources or even the needs to profit from crashes.

I think the easier and better path for us is to earn juicy returns during the good times and try to survive the bad times.

If we survive the bad times with the least amount of damage, we put ourselves in a good position to benefit from the good times and the good times ahead. multibagger stock they generate.

I believe the legendary Peter Bernstein said something along the lines of this. ‘Existence is the only road to riches’, is one of his most famous quotes.

Thus, in the spirit of survival, here are the things one needs to do.

Instead of keeping 100% stock portfolio, it makes sense to invest at least 25% in bonds or fixed deposits at all times. You can take it up to a maximum of 75% if you feel that the market has gone far beyond the fundamentals. Right now it would be better to keep this ratio at 50:50.

In terms of stocks, avoid getting involved in good quality but extremely expensive stocks and also avoid poor quality stocks, no matter how attractive their valuations. Both are big downside candidates in case the market turns down.

And finally, invest in stocks with strong balance sheets and a long history of profitability. These two factors allow businesses to survive even during tough times, even as the weaker competitors around them come to the edge.

So that’s it. Always keep these factors in mind and I think you can survive even the worst market crash.

While this may not allow you to make 163% returns like Neil Berger when the market is down, it can set you up for nice, juicy returns when things turn for the better. And I think it’s not a bad idea at all.

Happy Investing!

Disclaimer: This article is for information purposes only. This is not a stock recommendation and should not be treated as such.

This article is syndicated equitymaster.com