Contributed by: Show Editorial Team
Davis says investors should be ready for economic downturn
Be positioned to take a punch. That was the advice Chuck Davis, CEO of Stone Point Capital, gave investors during an interview with the Traders Network Show at the 2019 Greenwich Economic Forum.
“Pricing right now in almost every asset category is very, very high, and this is the first decade since I have been in business that hasn’t had a major correction. That’s just something that is going to happen at some point, and I think people have to be ready for it,” Davis told host Matt Bird.
Investors would have been wise to heed Davis’s advice. The pandemic of 2020 precipitated the decline Davis predicted in ways few people could have seen coming. And even when the economy recovers from the impact of Covid-19, another downturn is inevitable.
Preparing for a recession means limiting risk, Davis said. “People need to be a little more cautious now than a few years ago,” he said at the 2019 forum. Maybe have more cash, maybe borrow less money, he advised. “Just be positioned to take a little bit of a punch.”
To be well-positioned during a downturn, Davis said his own firm was interested in countercyclical investments—businesses poised to do well when the economy dips. For instance, Stone Point backed one company that helped companies going into bankruptcy and another company that helped consumers climb out of debt.
“If the economy turns down, they will be even more needed, and their services will be even more involved,” he said.
Another future worry in which Stone Point has a vested interest is pension deficit. Davis said the majority of his firm’s investors are pension funds, including for most U.S. states.
“Everybody knows they are struggling with pension deficits, so if we can give them good returns, that does well for the public sector,” Davis said. “So we use private-sector skills to, hopefully, help the public sector.”
Even with such looming concerns, Davis expressed optimism.
“We are very excited about the future and the opportunity to be able to create jobs and wealth for people.”
(Written by Andrew Waite; Editing and revisions by Nicole Liddy)