How to Invest During a Recession

2020 has seen one of the most adverse world market conditions where the future remains largely uncertain. Both traders and investors have started voicing concern over the possibility of an upcoming recession since global growth has started to stagnate due to a variety of reasons.  A recession is technically defined as negative GDP growth for two successive quarters, where company profits start to slip as the economy contracts.

In spite of what some would consider dangerous market conditions, traders and investors have found ways to trade even during the heaviest of recessions. Certain sectors of the stock market can still increase in value and there are even possibilities of creating positive returns in currency and commodity markets. This article aims to discuss certain ways how one can invest during the recession.

Investments to make during a recession

  • Gold as an Investment During Recession: The commodity market is a good place to look for some investment opportunities, specifically Gold ( XAU/USD), which has a stable store of tangibility and value. It is hence regarded as a safe asset. In times of recession, it can act as an inflationary hedge making it an attractive investment. It can also be used as an inflammatory hedge when inflation looms, in periods of lower interest rates.
  • The US Dollar as an investment during the recession: The US Dollar also shares some attributes with gold, making it a kind of haven as well. As the world’s reserve currency and the world’s largest economy behind it, the US dollar is sought after for its liquidity among other reasons. Even when other domestic currencies around the world get affected due to inflationary pressures and their purchasing power falls, the US currency still functions as the quasi-currency of exchange in those nations.
    The US dollar has been proven to be an attractive investment in some of the most tumultuous periods of uncertainty experienced in world markets. A great example would be the Great Financial Crisis, where the US Dollar still surged about 25% from 2007 to 2009.
  • Stock to Watch During Recession: Even under adverse circumstances, there are stocks that have strong growth prospects for the future no matter what. Since investors bank on the ability of these particular companies to generate increased income as time goes by, these stocks still command large valuations and produce high returns as a result. As a result, these stocks have high price to earnings ratio, similar to those of the leading tech stocks in the market. In the event of an economic downturn, as investors start to align their income assumptions with lower consumer spending and slowing growth rates, the aforementioned stocks are often discarded.

There are also some stocks that have more modest but stable income generation capabilities.  These stocks generally tend to be protected from the strong shocks that come with recessionary periods. These stocks include stocks in the healthcare, utility and consumer staple sectors. Traders can add these to their portfolio of stocks to protect them in rough market patches as well as drawn out recessions.

A recession doesn’t have to result in investor panic, and there are still some sectors in stocks, currencies and commodities which would generate income during such adverse times. Traders and investors can rely on online brokerage sites which provide reliable and regulated access to different financial instruments to trade with convenience. One such example is IQ Option.

Using IQ Option as a broker  is an online brokerage site, which offers numerous tradable assets with different assets to choose from. Registered and regulated by CySec (Cyprus Securities and Exchange Commission), IQ Option covers forex, cryptocurrency, commodity as well as stock markets by offering CFDs on all of them. It also offers binary options trading to non-EU traders on forex pairs, certain commodities, and certain stocks.

Registering at IQ Option is easy and not time-consuming. Traders can sign up and start trading with as little as a $1 USD investment, and a minimum deposit requirement of only $10. This allows access to a growing number of traders from around the world, from all scales.

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