So far, the spread of COVID-19 has disrupted activities of world economies, strained global supply chains, hampered manufacturing and industrial production, as well as trade. No doubt, as the IMF indicated, the world has been put in a ‘Great Lockdown’, with global growth in 2020 projected to decline by 3.0% and world trade volume growth by -11.0%. As economic activities continue to dwindle, we highlight ways by which investors can build a stable portfolio, to weather the incoming recession.
In the current economic environment, it is important to maintain a medium to a long-term perspective when investing. With stock prices at record lows, investing in fundamentally sound stocks with a demonstrated history of consistent revenue growth, cost efficiency, stable profit and consistent dividend payment is essential. In addition, investing in sectors that are likely to benefit from the pandemic (Healthcare, Telecoms etc), Banking stocks due to liquidity and defensive stocks (Utilities, Consumer Essentials etc) can help returns on a portfolio, by creating significant upsides. Furthermore, recessions are associated with increasing inflation and higher bond yields. Hence, buying both dollar and naira bond instruments can help too.
Finally, the most important point is to maintain a diversified portfolio, spreading your risk across diverse sectors and asset classes. Bearing the above in mind, investors can comfortably position their investments and limit their losses, even in the wake of a global recession fuelled by the COVID-19 pandemic.
United Capital Research