Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Should You Invest During Recession?

Stock-Markets / Recession 2015 Sep 18, 2015 - 05:09 PM GMT

By: Submissions

Stock-Markets

Nicholas Kitonyi writes: The general rule is that the best time to invest in the stock market is when stock prices are low, and sell when they are high. Ideally, stock prices trade at low prices during recession as compared to when the economy is expanding.

However, as many investors would tell you, it is not always that simple. In fact, sometimes it is much difficult to pick out the right stocks during recession because you never know where the recession would leave the company by the time it’s over.


Some companies actually do get liquidated due to recession, while others continue to thrive regardless of the circumstances. Remember Lehman Brothers back in 2008/2009? Even the biggest companies can get caught up in a financial crisis leading to closure.

The other way of investing during recession is trading derivatives in which case the investor does not have to own any stock, but only to profits based on the upward and downward movement of the price of the underlying asset.

Some of the best instruments to trade during such times would be forex, options and commodities via various trading platforms including mobile devices via apps such as this one for OptionsXo. CFDs would also be ideal, as would be binary options and spread betting.

With these instruments, it does not matter what the direction of the market is, and importantly traders are not required to top up their accounts with huge sums of funds when trading short positions. However, there is also the risk that traders might lose money to fraudulent/untrustworthy brokers. As such, it is good to do due diligence on the broker that you intend to use when trading in such markets during recession.

One of the best ways to do this would be to check out whether there are any reviews done about the particular broker on major websites, like this case here. It gives you a good picture of the broker you are just about to start dealing with.

However, if you are only intent on investing and owning what you buy, then you may consider choosing your stocks wisely. This is what you should look for in a company that could thrive during recession.

Companies whose customer base appears immune from economic meltdown may be ideal picks during recession. For instance, companies operating in the energy sector are bound to thrive during recession because the cost of transportation and production of energy-reliant goods goes up. A good case example is the manner in which the price of oil rallied during recession beginning 2008/2009.

As demonstrated in the chart above, it is pretty clear that Oil outperformed the NASDAQ Financial sector index between January 2009 and May 2011. This is primarily due to the fact that during financial crisis, people tend to spend less, thereby weakening the financial industry, but when it comes to energy products, it is impossible to control spending. In general terms, when the price of oil goes up, shipping goods becomes more expensive, as was the case back in 2011.

Another interesting factor that investors may want to look at is whether the given company operates in an industry where most of its customers are required by law to acquire the company’s products or services. For instance, an audit firm, or a tax advisory company will always have clients as long as it keeps delivering quality service regardless of the direction of the economy.

Another good example would be the type of company that offers best in class products, or products that have few/zero substitutes. Customers are likely to continue purchasing the products/services of such a company regardless of the status of the economy. In other cases, if a company’s products have many substitutes or aren’t the best in class, chances are that customers would opt for cheaper and possibly better substitutes during recession.

The other unique characteristic that investors should look for when choosing stocks to invest in during recession is essential products/services market. We all know that regardless of the status of the economy, if a product/service is essential for human livelihood, then it does not matter what the economic indicators suggest.

US Support services index versus US Investment services index 2009-2013

A good case example in this case is a repairs company. If a machine breaks down, then it will definitely need repairs to continue operating, or if your drainage system is blocked, then it will need to be services. Also support Service companies tend to continue doing well during recession as compared to investment services company. Such companies do not care whether the economy is slowing or growing.

Conclusion

The bottom line is that whether you are a long only investor, or a trader who can also juggle derivatives market, there are steps needed in identifying the best way to invest during recession.

Therefore, as people continue to speculate about the status of the global markets and the immediate future thereof, it is important to consider your choice carefully before pouncing on what would appear to be a cheap stock only for the company to end up in bankruptcy like was the case of Lehman Brothers.

By Nicholas Kitonyi

Copyright © 2015 Nicholas Kitonyi - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in