Are we headed into a recession? If yes, how do you invest, stay afloat? – Business Daily
When an economy experiences negative growth for two consecutive quarters, it is said to be in a recession.
An economy is typically in a recession or is about to enter into one if it experiences a string of business layoffs, earnings misses, interest rate increases intended to tighten the monetary system, rising costs of living, an inverted yield curve, slowing housing demand, and negative business and consumer sentiment surveys.
Even if the Kenyan economy may not meet all the criteria, the cost of living has increased dramatically because of commodities prices forcing consumer prices to unprecedented heights. Another significant issue to take into account is business slowdown prior to the national elections in August.
The Nairobi Securities Exchange’s all-share, 20, and 25 indices have all fallen since the year’s opening, signaling a bear market. Similar to the US SP500 index, which has experienced a year-to-date decline of 18.25 percent, the broader NSE all-share index has experienced a decline of 17.95 percent. So, how do you stay afloat?
From the perspective of investments, a recession can result in a bear stock market, which can result in losses on stock holdings. You must therefore conduct research and switch your portfolio’s stocks to inflation-proof ones. You can buy dollar-denominated inflation-proof stocks in the US and EU region using apps like FXPesa.
Leading consumer staples stocks may be involved in this. The underlying principle is that the typical household will continue to purchase food, milk, and table salt regardless of the state of the economy.
Companies whose main source of revenue is from government clients tend to do well in a recession environment. You may seek to buy stocks of such companies or seek employment from such. When a recession hits, central banks frequently start by first raising interest rates.
This raises borrowing costs while also raising the credit risk. This makes it more difficult for a buyer to buy your property, increasing the illiquidity of the real estate market. While those with lots of money can buy valuable properties at discounted prices, sellers typically suffer the most during a recession.
It is wise to keep your funds in assets that can be easily liquidated to take advantage of lower equity prices and take care of emergencies.