It looks like a painful global recession is just around the corner. Are you ready for it? Ratings agency Fitch recently suggested that “a recession of unprecedented depth in the post-war period” is approaching.
It predicts a 3.9% contraction in the global economy in 2020 too. Oof. It’s a scenario the agency says “would be twice as severe as the 2009 recession.”
A recession is coming, sure. But it’s not cause for stock investors to sell their holdings in a panic. It’s no reason for them to lock their money in low-yielding products like Cash ISAs either. It’s still possible to buy shares today that will thrive, not just over the long term, but in the next few years too.
Will a global recession boost this share?
Silver producer Hochschild Mining (LSE: HOC) is one of these. Gold is considered the ultimate safe-haven asset by many. So significant price gains here have grabbed most of the attention recently (it recently spiked to new multi-year peaks of $1,750 per ounce).
Those price movements have taken the attention from silver. But gains here have been quite brilliant on fresh fear-related buying. Just yesterday, it stormed to three-month peaks around $17.50 per ounce. Many metal experts are becoming increasingly bullish on what they think the price will hit as economic uncertainty intensifies.
Playing the ratio
Investment demand for silver is booming. Latest data shows silver exchange-traded funds (or ETFs) have enjoyed inflows of some 95m of material since the turn of the year. It could be argued that there’s more scope for silver demand to rise than gold in the months ahead too.
The gold/silver ratio calculates how many ounces of silver it takes to buy once ounce of gold. It’s a useful gauge to tell how much value these flight-to-safety currencies offer in relation to each other. And it looks as if traders and investors are beginning to ‘trade the ratio’ and get more bang for their buck by buying into the cheaper asset.
Sure, the ratio has retraced a bit from recent record levels above 125, but it still perches around 100. The long-term average sits closer to the 60-odd mark and leaves plenty of room for more tactical buying. It’s another reason why plenty of brokers are believing that silver prices will continue rising during the first few years of this new decade at least.
Room to grow
It’s also another reason to be bullish over profits at Hochschild Mining. The FTSE 250 digger has leapt 135% in value as silver prices have surged over the past couple of months. It might consequently trade on an elevated forward price-to-earnings multiple around 35 times.
But this is a share that could still prove a brilliant buy as a severe global recession likely keeps silver bullion well bought.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.