What to do if recession hits

[Maeda_Toshiie]

Thinking about it too but when I look around I was ended up in Singapore as the safest bet
Which country do you suggest?
I actually prefer CHina is it’s the world center for the next century
I don’t like to go to a country where I will be the minority

Investing in a country =/= living in the country.

Secondly, given how heavy handed the PRC government treats its citizens, are you sure you want to live in there?

 

[Shiny Things]

Missed the boat, where is the fear, who is pushing up the broad indices?

So this is a legit question. The evolution of buyers of US equities (since I assume you're talking about US equities, not about Singapore equities) over the last few weeks has been:

1) Dip buyers - people who were brave enough to catch the falling knife at the end of December;
2) Professional fund managers buying back in
3) We're now starting to see risk-parity and vol-control funds programmatically buying back in. These funds tend to automatically buy equities when markets are less volatile (i.e. when they're going up).

Retail seems to have swung back in a bit in late-February and early March, going by mutual-fund and ETF flows. They were all spewing it out at the lows in December/January, though, so there's still plenty of buyers out there "on the sidelines".

 

[revhappy]

What do you guys sense when you smell the tea leaves? Is the economy booming? Do you see property prices sky rocketing? Do you see hikes and hiring like crazy? Do you see the animal spirits?

I work for a European bank and this time my hike was lowest in several years. Bonus was cut too.

 

[limster]

What do you guys sense when you smell the tea leaves? Is the economy booming? Do you see property prices sky rocketing? Do you see hikes and hiring like crazy? Do you see the animal spirits?

I work for a European bank and this time my hike was lowest in several years. Bonus was cut too.

so everyone is being careful and taking precautions. your bank is also building up warchest.

study the last few crashes, there is usually 'irrational exuberance' or at the very least "FOMO", i'm not sensing either of that yet. of course, if markets keep charging forward and gain 50%, maybe the market will then crash 30%!

my mode now is 'balanced', some money i use to invest, some money goes to build up warchest!

 

[revhappy]

We are back to bad news is good news situation. Markets don't care that economy is bad in most places. What they care is that central banks are keeping their taps open. What sh!t is this.

 

[Prof. Utonium]

Workplace gearing up for recession next year. How true I am not sure but sales had been dropping badly.

 

[limster]

Workplace gearing up for recession next year. How true I am not sure but sales had been dropping badly.

if companies are able to prepare and cut costs, then they will still remain profitable and able to pay dividends! Power of CD!

Furthermore recessions usually affect the weaker companies first..while companies with cost advantages can even expand their dominance during recessions. Make sure you pick the right stocks!

 

[havealaughclown]

Bros, recession already here liao!

 

[limster]

Bros, recession already here liao!

pls provide link to the data showing a recession. Otherwise#fakenews.

 

[Shiny Things]

What do you guys sense when you smell the tea leaves? Is the economy booming? Do you see property prices sky rocketing? Do you see hikes and hiring like crazy? Do you see the animal spirits?

I work for a European bank and this time my hike was lowest in several years. Bonus was cut too.

That's because you work for a European bank, and Eurobanks have been non-stop disaster areas for over ten years now. Have you seen the headlines around Deutsche lately? The rolling disasters in Italian banks? How about WestLB, which straight-up evaporated in 2012, or Banco Esperito Santo in 2014? And does anyone remember the entire Greek and Cypriot banking sectors imploding and nearly taking BNP Paribas with them?

And I spent four post-crisis years at German banks (not Deutsche, which should be a giveaway), with more than one doughnut on bonus day, so I've been there right alongside you.

But don't confuse your employers with the rest of the global economy.

Singapore's economy is slowing, but it's not in a recession. The US economy is actually relatively healthy. Europe, Japan and China are... meh, I'll give you that, none of them are very exciting.

But, to answer the original question:

In event of recession / expected prolonged downturn, what type of investment would you suggest to park funds to wait out for equity bottom?
What has an inverse correlation with equity?
Bonds, Gold, Crude Oil? Or SSB?

Bonds - regular SGD-denominated government bonds, not SSBs - are the right place to park cash if you genuinely think that there's a recession coming. As the economy slows, interest rates will drop, which sends bond prices higher.

(Why not SSBs? Because their price doesn't go up as rates drop; it's always fixed at 100. If you're betting on a slower economy and lower rates, you want to capture the capital gains as bond prices go up.)

 

[peipei1]

What is a Recession
A recession is a significant decline in economic activity that goes on for more than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical defintion of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP), although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

Causes of a Recession
Recession is a normal, albeit unpleasant, part of the business cycle. However, one-time crisis events can often trigger the onset of a recession. The global recession of 2009 brought a great amount of attention to the risky investment strategies used by large financial institutions, along with the global nature of the financial system. As a result of the wide-spread global recession, the economies of virtually all the world's developed and developing nations suffered significant setbacks. Numerous government policies were implemented to help prevent a similar future financial crisis as a result. Typically, a recession lasts from six to 18 months, and interest rates usually fall during these months to stimulate the economy.

A History of Recessions in the United States
Economists say there have been 33 recession in the United States since 1854 through to 2017. Since 1980, there have been four periods of negative economic growth that were considered recessions.

• July 1981-November 1982: This recession affected most of the developed world between the late 1970s to the early 1980s. During this time, the Federal Reserve wanted to rein in inflation and, as a result, began to tighten its monetary policy. Effects from the energy crisis in 1979 (the output of crude oil dropped in the wake of the Iranian Revolution, causing an uptick in prices) were also felt throughout the economy. American unemployment peaked at 10.8% in November 1982 and GDP declined 2.7% .
• July 1990-March 1991: This downturn was caused by a combination of the Iraqi invasion of Kuwait in 1990 (which caused a shock to oil prices), weaker consumer and business confidence and declining employment. It was estimated that the economy lost about 1.6 million jobs during this period — most of which were in the construction and manufacturing sectors.
• March 2001-November 2001: This downturn was a result of Y2K, when dot.com companies were enjoying relatively high interest from investors. This boom led to a bust, with stock prices plummeting along with the values of many high-tech companies. But at the time, the Fed continued to raise interest rates, making it more difficult for companies to obtain (cheaper) credit to stay afloat. The 9/11 attacks also took place during this period, which worsened the crisis. The New York Stock Exchange (NYSE) closed for four days and U.S. indices dropped to some of their lowest levels following the attacks.
• December 2007-June 2009: The housing bubble burst in the U.S. because of the subprime mortgage crisis. Oil and food prices still rose, despite a drop in housing-related assets. Many of the country’s large financial institutions failed or collapsed including Fannie Mae, Freddie Mac, Lehman Brothers, Bear Stearns and AIG. The nation’s car industry also experienced a fallout and stock markets saw significant drops. The government responded by introducing a $787 billion stimulus package to fuel economic growth.

 

[peipei1]

Interest rates low, employment good, no risky investment strategies. What recession?

Hey Shiny what do you think about earnings recession? I think we could be in a new world, rolling bull-bear market interrupted by earnings recession before a new cycle kicks off in the interim, technology is growing at fast pace, break through comes faster, companies have access to capital from index investors. A world dominated by fewer but larger corporations and money managers. If we concern about over-valuation, FAANG stocks sticks out, well Aapl seems to do well with their earnings! Buy Aapl!

So friends, stay in the market and btd? Luck wor i sold only a smidgen of my long term Iwda holdings, hand itchy!

 

[revhappy]

Interest rates low, employment good, no risky investment strategies. What recession?

Hey Shiny what do you think about earnings recession? I think we could be in a new world, rolling bull-bear market interrupted by earnings recession before a new cycle kicks off in the interim, technology is growing at fast pace, break through comes faster, companies have access to capital from index investors. A world dominated by fewer but larger corporations and money managers. If we concern about over-valuation, FAANG stocks sticks out, well Aapl seems to do well with their earnings! Buy Aapl!

So friends, stay in the market and btd? Luck wor i sold only a smidgen of my long term Iwda holdings, hand itchy!

Rates are not low. Look at most people's home loan rates are climbing in Singapore. The yield curve is flattening. Last year at this time 1 yr bond yield was 1.54% and 10 year was 2.6%. Now 1 year is 1.96% and 10 year is 2.2%. So the curve has flattened. This isn't a sure sign of recession but it can potentially lead to a recession.

I will be watching US job creation numbers with lots of interest now, especially after the shocker 20k jobs created in Feb v/s expected 180k. Yesterday's manufacturing numbers were also bad. All this trade war related tariffs need to have impact on the earnings. We should start seeing them soon.

https://twitter.com/charliebilello/status/1106672372701114368

 

[RMCWMR]

That's because you work for a European bank, and Eurobanks have been non-stop disaster areas for over ten years now. Have you seen the headlines around Deutsche lately? The rolling disasters in Italian banks? How about WestLB, which straight-up evaporated in 2012, or Banco Esperito Santo in 2014? And does anyone remember the entire Greek and Cypriot banking sectors imploding and nearly taking BNP Paribas with them?

And I spent four post-crisis years at German banks (not Deutsche, which should be a giveaway), with more than one doughnut on bonus day, so I've been there right alongside you.

But don't confuse your employers with the rest of the global economy.

Singapore's economy is slowing, but it's not in a recession. The US economy is actually relatively healthy. Europe, Japan and China are... meh, I'll give you that, none of them are very exciting.

But, to answer the original question:


Bonds - regular SGD-denominated government bonds, not SSBs - are the right place to park cash if you genuinely think that there's a recession coming. As the economy slows, interest rates will drop, which sends bond prices higher.

(Why not SSBs? Because their price doesn't go up as rates drop; it's always fixed at 100. If you're betting on a slower economy and lower rates, you want to capture the capital gains as bond prices go up.)

The only banks that are doing well currently are the asian banks namely malaysian and singaporean banks. The rest are meh. And even that i'm not sure the singaporean banks will hold up in the slowing economy. Malaysian banks on the other hand are pretty much insulated as they have local demand and gov pump priming the economy.

 

[SBC]

Good to buy some VIX.

 

[touchring1]

Bros, recession already here liao!

bro, u do sales or run own biz?

 

[RMCWMR]

When recession comes, all banks will do POORLY!

Define poorly. Share price - yes. Profit drop - yes. Bankrupt - very very unlikely for Malaysian and Singaporean banks. The gov will step in to bail them out.

 

[Shiny Things]

Hey Shiny what do you think about earnings recession?

I think, Peipei, that you are once again letting your eagerness to trade get the better of you. I also think it’d be better for you to leave your portfolio alone, because you are not a good trader.

 

[tangent314]

Bros, recession already here liao!

Quick, time to put all your money to buy SPXU since you're so confident about the recession!