With the global economy greatly impacted by global lockdown measures, huge cuts to growth figures have been made around the world. Recovery is expected to be slow, and if human interaction is limited with social distancing measures, most companies cannot truly operate as usual. Consequently, the specter of a global recession looms large on the horizon.
In these uncertain times, it’s important to be sure you’ve adopted good financial and investing habits, so then you can better protect your capital and make it grow. American accounts like 401K, or Canadian accounts like TFSAs and RRSPs, should have an important place in your global investment strategy, as you will be better equipped to save money for the future and invest it…not to mention the taxation benefits.
Understand that growth might take time to return to pre-virus levels
In its latest Global Economic Outlook (GEO) forecasts, FitchRatings downgraded its growth forecasts for many large economies. Fitch’s chief economist Brian Coulton even declared that GDP might not revert to its pre-coronavirus levels before late 2021 in the United States and Europe. But in the end, it all comes down to how long lockdown measures will last.
‘We now expect world economic activity to decline by 1.9% in 2020 with US, eurozone and UK GDP down by 3.3%, 4.2% and 3.9%, respectively. China’s recovery from the disruption in 1Q20 will be sharply curtailed by the global recession and its annual growth will be below 2%,’ according to the report from FitchRatings.
Pick your financial assets carefully
When the virus started to spread outside of China, stock markets around the world tumbled quickly. A few months ago, Wall Street recorded its largest daily drop since Black Monday, on October 19th of 1987.
Financial markets have recovered since then, but many analysts are worried about the speed at which markets bounced back, especially with so many uncertainties about global growth and inflation levels with all monetary and fiscal stimulus implemented around the world. Wild price movements on major asset classes should still be expected.
Still, there are many good buying opportunities you can take advantage of, like investing in solid growth companies that are still showing a reduced share price you can take advantage of. Gold and other investment metals are also great investment opportunities. Considered safe-haven assets, they have recorded a surge in demand from worried investors since the beginning of the year.
Use diversification while planning your investment strategy in a post-pandemic world
will help you reduce the overall risk and volatility of your
investment portfolio. Here are 10 things to take into consideration
to build a diversified portfolio:
1# Choose different asset classes
2# Consider several types of investments
3# Invest in different economic regions
4# Take into account business segments and seasonality
5# Use different currencies
6# Select investments of different time horizons
7# Consider the level of liquidity of your investments
8# Adopt a specific management style
9# Set up a tactical asset allocation
10# Consider the quality of your investments
Given the speed in which the coronavirus triggered intense lockdown policies around the world, global growth prospects for the near future were profoundly affected, impacting prices of most asset classes.
In this post-pandemic world, you will need to adjust and rebalance your portfolio to be better prepared for the new era to come. Expect high volatility with intensified fears over a global recession that might last longer than anticipated, as recovery might still be limited.