The truths about investing in stocks during recessions
Selling out of stocks in a recession may prove to be a costly mistake
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LATELY, the dreaded “R” word has been making its rounds. Yes, I’m talking about a recession, a risk that is not confined to any specific country. In fact, in early July, the chief of the International Monetary Fund, Kristalina Georgieva, warned that a global recession cannot be ruled out.
The thing is, recessions are not within our control. Yet, as investors, we are affected by it. This begs the question, what should stock market investors do now that the possibility of a recession looms in the background?
I don’t have a panacea, but what I can offer are historical perspectives – truths, if you will – about stocks and recessions. The US stock market is a great case study. According to the Visual Capitalist, the US accounts for nearly a quarter of global economic output while its stocks make up around 40 per cent of the total global stock market capitalisation, based on data from the Securities Industry and Financial Markets Association.
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