BEAR MARKETS: Where are the investment safe havens during a recession?

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High inflation, geopolitics, the war in Europe and a looming recession sent equity market indices tumbling into bear market territory during the first six months of this year. As with most bear markets, this has prompted investors to seek safe havens ...

Izak Odendaal, strategist at Old Mutual, says a bear market early on in your investment lifetime is not necessarily a bad thing.

Roelof Feenstra, portfolio manager at Independent Securities, says although recessions are generally negative for equities, high-interest environments do benefit certain sectors such as industrial commodities, gold and property. “What is clear is that the US will experience a reduction in economic growth caused by the aggressive monetary tightening of the US Federal Reserve.

Russia’s invasion of Ukraine has only added to inflationary pressures, and the subsequent sanctions on Russia have led to an acute global shortage in the supply of key commodities. As a result, global oil, gas and metal prices have increased significantly. Chester says with South Africa’s inflation rate well below rates in many developed markets, South African equities and government bonds currently offer “compelling investment opportunities”.

He notes that property has also historically done well during such periods, as the effects of inflation get passed through to rental escalations and mortgage rates are typically fixed while the replacement value of assets also rises.

 

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