Investment Strategies Fit for Recession Times

The uncertainty of a looming recession and high market volatility makes almost all investment options look doubtful as investors search for safe and reliable investment tools. Given the current market situation, is there any viable and practical solution to secure investors' funds and generate a positive return available for investors? Investment Director of Sigma Global Management herein shares his perspective on the situation.

  1. Is the downturn in a global economy really critical and the recession is inevitable?

Central banks across the world have been raising key interest rates in an attempt to halt the inflation that is running at 40-year highs. The Fed raised interest rates three-quarters of a percentage point for the third time in a row this year, bumping the federal funds rate to a target range of 3.25 to 3.50 percent. BoE raised its key interest rate by 0.5% to 2.25%, which is the highest level in 14 years. The Central bank of Switzerland joined the flurry of rate hikes by announcing an interest-rate rise that would bring its benchmark lending rate above 0% for the first time in eight years. Swedish Central bank increased its key interest rate by 1 percentage point to 1.75%, marking the biggest hike in almost three decades. For the first time in 24 years, the Bank of Japan intervened in the foreign exchange market to prop up the abrupt plunge of the yen, as rising import costs have been disrupting the country's broader economy.

In September, the British pound touched its lowest point in 37 years against the dollar. The Dollar gained 1 percent against a basket of currencies of major U.S. trading partners. The euro keeps lingering at its lowest levels against the dollar, not seen since 2002. A surging greenback can stifle the profits of U.S. multinationals and take a toll on global trade, with so much of it transacted in dollars.

The US GDP has seen another decline of 0.6% in the second quarter. The spread between 10-year and 2-year Treasuries is (-)0,37%. It has been inverted since early July with the shorter-term yield exceeding the longer-term yield.

S&P 500 index YTD is (-)24,71%, Dow Jones index YTD is (-)19,44%, Nasdaq YTD is (-)32,62%.

All the signs are in place pointing to an upcoming recession.