FORTUNE: The Best Financial Strategies for Surviving a Recession in 2023 from 3 Top Advisers
This article was written by matt heimer and was originally posted in FORTUNE on november 29, 2022. Here’s an excerpt highlighting georgia’s contributions to the conversation, and you can read the full article and watch the video here.
Acclaimed investing pros share their advice for navigating a recession: Stay calm, stay invested, and invest locally.
The past 12 months featured some relatively grim milestones—including the highest inflation in four decades and the first truly durable bear market since the Great Recession. That concatenation of bad news poses two challenges for investing pros: They need to figure out where to find positive returns, and they need to talk their clients out from under their proverbial beds. Neither of those prospects daunted our experts. Indeed, they were united in the view that a rough 2022 could pave the way for a better 2023—for stocks, society, and our psyches.
Joining us for this year’s panel were Josh Brown, CEO of Ritholtz Wealth Management; Georgia Lee Hussey, founder and CEO of Modernist Financial; and Savita Subramanian, head of U.S. equity and quantitative strategy as well as global ESG research at Bank of America Merrill Lynch.
Fortune: The markets have been in a long downward trend, and none of us, as adult investors, has ever coped with inflation this high. Did the three of you see this coming?
Georgia Lee Hussey: I’ve been telling people that market cycles generally are seven to 10 years. And for a while my Spidey sense has been saying: At some point, we’re going to have some kind of correction. We’ve been working with clients building cash positions, building line-of-credit positions, especially for business owners, so they have a lot of choice when the market does correct or, more importantly, when the recession impacts their business.
Our clients are in a position where they have significant means. So as long as they don’t panic in the bottom, they’re fine. And so there’s a lot of time spent reminding folks of that and preparing them to be able to not only weather but utilize this moment, focus on the things that are going to set them up for the next phase.
Emotional decision-making can work in our favor or work against us. A lot of the work that we do is preemptive: We’ll ask clients, “What do you want me to tell you when the market goes down?” We literally write it down and then pull up the file to remind them what their more grounded, stable self said they wanted to do.
Fortune: Georgia, you’ve been telling your clients that if they’re bullish, everything’s on sale—but ESG in particular, right?
Georgia: Yeah, we have clients that were in a globally well-diversified, all-the-good-stuff portfolio, but they wanted to move to ESG eventually. And I’ve had pings in my software for years, so when the downturn came, we were ready to move. And we’re taking a 20% discount on that reallocation. So that’s been really satisfying.
Josh: Do you find that your clients are more likely to stick with a portfolio that aligns with their values?
Georgia: What I find is that when they’re really grounded in their financial plan, to your point earlier, when they really understand their goals, and when they’re very committed to values not only in their investments, but also in their charitable donations, in the way they show up the community, and the way they spend their time, all the areas of wealth really —the investing piece becomes the engine and not the path. Right?
Savita: We’ve also been seeing that at Merrill Lynch—we’ve got this growing cohort of not just younger millennials or Gen Zers, but a larger cohort of high-net-worth female investors, or of folks just looking to allocate capital according to their values.
Georgia: There’s something quite radical about investing in companies that are not going in the direction you want, and then utilizing shareholder power to say, “You have to move in this direction.” One example I offer clients is the Sisters of St. Francis of Philadelphia: They bought into Goldman Sachs in order to put forward a letter that they would have to read at the next public board meeting, explaining their issues with the social implications of Goldman’s decision-making. And when Goldman Sachs didn’t respond, they put out a press release saying, “You did not respond to Sister Nora Nash’s letter.”
Fortune: A scarier economic climate often scares people away from philanthropy. How are you steering people through that?
Georgia: We’ve been talking a lot about, again, understanding what is enough. Most of the people we’re talking about have significant resources. If they haven’t totally overleveraged their lifestyle, they’re probably going to be fine.
We need to remember that the market is not the economy, and the economy is not the market. And the economy makes me very worried about food banks. Children are hungry, people are hungry. And when kids can’t eat they can’t pay attention in school, and if they can’t pay attention in school they can’t be good students; they can’t move forward in the world. And as a business owner I’m thinking, I need to hire these folks in 20 years. And so there’s a way in which we keep saying, “Don’t worry about your portfolio. Give some money to a food bank instead.
We did some research, because I was curious: What is the ROI on investing in kids? There was a study done that showed that an investment in programs for birth to five years old will have a 13% ROI by reducing costs for our shared systems like prisons and healthcare. And so I would say, move your focus away from your 401(k) or your trust account and instead focus on the thing that will actually benefit your neighbors, which will benefit your local businesses, which will benefit our interconnectedness. But I think this is really the opportunity of this moment.
What I’m interested in here is: Individual investors have a lot of power to make choices about how they allocate their capital, and that includes who manages their money. There are lots of fabulous female managers out there, or managers of a diverse background, who probably see the world differently. And that’s what we need right now, to navigate a world that is uncertain.
Fortune: What’s something you’re feeling optimistic about?
Georgia: I think this is an exciting moment, but an uncomfortable moment. There are strong reasons to be nervous right now. SCOTUS’s rulings on reproductive rights are unnerving all of our clients, as well as their signaling about gay rights, trans rights, and the impact that could have on my clients who have nontraditional families and businesses.
I think we have an opportunity to be self-aware, realize that we’re freaked out and scared and anxious and not take action, but rather use this as an opportunity to reflect. What are our priorities? What are our values? What do we want to be doing now? And then do the really radical thing, which is to not do a damn thing. I don’t think we’re ready. We’re grieving. We need to take a beat, as investors don’t do anything in the down market, but also just chill, hang out with people you love, and figure out who you want to be in this next phase. Because I think it’s burgeoning. I think there’s a lot of opportunity. And I think that’s where we’ll find a lot of the solutions to what we need next. But we’re not quite ready to take action yet.