Where to Hide — Generating alpha during a bear market is a challenge. Period. Not only is it tough to pick individual positions in a market that is trending lower, but it’s also a mentally and emotionally draining proposition.
Let’s talk about hypotheticals for a minute; the Fed continues with quantitative tightening and its hawkishness as you’d think they will, given everything that’s been in the public eye lately, and Daddy JPow squeezes us *just a little* too tightly, and there is no soft landing. What next?
Well, the mythical r-word, of course.
During a recession, how should I invest?
Historically speaking, investors tend to seek risk-off assets during a recession. Safe havens like treasuries and gold end up helping preserve wealth. Equities and higher-risk bonds lose value.
Technically speaking, a recession is two consecutive quarters of GDP contraction. So after last week’s GDP print, there’s a chance that three months from now, we will be hit with more surprising news: the feared r-word could be here.
Lately, we’ve seen the major crypto benchmarks move relatively in sync with the Nasdaq, but I have a hypothesis that if we have a significant r-word, BTC and ETH might be reliable stores of value in a broad downturn more significant than the correction we have lived through in the last few months.
As far as stonks go, Utilities and Consumer Staples tend to attract capital during a recession. This makes sense: people have to keep their electricity on, and when you take a $hit, you probably need to wipe. Thanks, Procter & Gamble.
If we do dig ourselves an even deeper hole, another sector to consider is Energy. If we have a hot summer when hydrocarbons are already priced at decade highs, it won’t just be utility companies raking in the profits; you’ll see ESG’s favorite sector grow fat with gainz.
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