The Motley Fool

The recession of 2020 isn’t over yet! Here’s what I’d do to retire early

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Economic Uncertainty Ahead Sign With Stormy Background
Image source: Getty Images

The recession of 2020  is not over yet. But stock markets have shown exceptional performance since late March. Some analysts even talk of stock market bubbles, whereas others are afraid of missing the rally. Who is right, and how should we invest now to retire early?

Recession is here

The macroeconomic indicators are in an extremely bad condition right now. The UK’s public debt level is at a record high. For the first time since 1963, it even exceeded the country’s GDP. Private households are in an uneasy situation too. Wealthier individuals may be able to save money as they cannot go out or travel this year. But others have lost their jobs and are facing serious problems. As a result, spending levels are low and will probably remain quite low for a while. Many economies worldwide, including the UK’s economy, are reopening, but I would not trust that. Even though the pandemic will eventually end, there is already a second wave of infections. This could lead to another lockdown, which would make things even worse.      

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Risk factors

As I have mentioned before, one of the main problems is the US-China conflict. It is not just about trade war uncertainty and political tensions, but also about many countries’ willingness to hold China accountable for the coronavirus outbreak. This could lead to stock market volatility as well as a lengthy recession.

For FTSE 250 investors, a no-deal Brexit is, undoubtedly, the main source of risk. In my view, however, it is only part of the de-globalisation process. The pandemic put significant pressure on air flights, logistics, global trade, economic, social, and political ties. Many countries will probably try to reduce their dependence on other countries. They will try to become more self-sufficient in order to prevent various shortages and logistics disruptions from happening in the future. For example, some companies might wish to move their production from China to their home countries. But this will raise their production costs since workers’ wages in China and other developing countries are much lower than they are in the US and the EU. So, it will put many global corporations’ earnings under threat.

However, I don’t think that the stock market fully reflects this. My colleague Edward Sheldon quoted legendary investor Jeremy Grantham, who noted that this rally has no precedence, and the financial fundamentals look quite grim for many businesses. Meanwhile, the FTSE 100 index has risen 30% from its March lows. The S&P 500, in turn, is up almost 40%. So, in Grantham’s view, we are in a bubble. This is a position that CNBC’s Jim Cramer, the host of Mad Money, shares. In his view, “it’s almost as if people decided Covid is over. It’s a ‘V-shaped’ rally, and you better get on board”. But the thing is that it is not over yet and it is risky to behave as if it has. 

What should I do now?

None of this means that an investor should refrain from buying shares right now. But it is important to choose them carefully and avoid overpaying even for “good companies with a great future“.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.