So, the news we’ve known about for months has finally been confirmed. The UK is officially in recession for the first time in 11 years. In formal terms, that means the economy has shrunk for two quarters in a row. Between April and June, the economy declined by 20.4% compared to the previous quarter. So it’s a biggie. But on the upside, the bulk of the pain happened in April, and May and June have actually seen an uptick.
Has your investing strategy helped you through?
If you invest in shares, you won’t need me to tell you that the UK stock market has crashed this year. And despite the pullback we’ve seen since the early carnage, the tentative recovery has cooled off a bit as people realise how long the economic downturn could continue.
So what investing strategy should we go for now? Which shares should we invest in to keep us financially safest until the danger is past? You’ll read plenty about recession-proof stocks these days, and I do think there are some very good picks out there. They’re companies that produce things we just can’t live without. Things that people carry on needing even during the toughest of times.
So a supermarket like Tesco seems a clear choice to me. Then we have Unilever and Reckitt Benckiser, which between them are responsible for a vast range of consumer brands with wide coverage of cleaning and health products. A medical emergency like Covid-19 reminds us that the big pharmaceutical firms are vital parts of our first-world lives too. So GlaxoSmithKline and AztraZeneca will always feature in my list of defensive stocks for times of recession.
Profitable portfolio
It’s no surprise that this group of stocks would have made for a good investing strategy. GlaxoSmithKline is the poorest performer in 2020 with a share price fall of 9%. At the other end, we have Reckitt Benckiser, which has soared 22%, with AstraZeneca not far behind on 14%. A portfolio of these five stocks would have had you on financially safe ground this year.
But, you might be thinking, it’s a wee bit late for me to be extolling the virtues of these stocks. Surely it’s too late to talk about how to invest for a recession after the recession has already been going for months. Waiting for a market crash, then selling all your fallen stocks and buying safer ones at higher prices? Well, that wouldn’t help your bottom line very much at all.
Timing the recession?
When is the best time to move to recession-proof stocks? I say that time is all the time. I think the best investing strategy during a recession is the same as the best investing strategy always. If you base your lifetime investing strategy on Warren Buffett’s first rule of investing, which says “Never lose money“, you should end up with safe, defensive, stocks that can see you through any recession and help provide for a comfortable retirement.
And if you add Buffett’s second rule to your strategy, you could be set for life: “Never forget rule number one.”
