There are opportunities too – but proceed with caution
When market prices dip, we also see investment opportunities, but investors should be cautious about trying to pick stocks themselves, without the advice and guidance of a professional.
Henry acknowledges that, although bonds tend to do better than stocks during a recession, understanding when to buy (through the benefit of considerable investment knowledge and experience) is crucial, and easy to get wrong.
It may also make sense to try to prioritise investing in companies which sell the goods and services that people desperately want or need. However, he notes that this is a tough job because it has been too long since we have been through a prolonged economic slowdown to test what consumers actually prioritise.
“Companies have a real balance to strike at the moment. To what extent can they pass on rising costs to their consumers without seeing a fall in sales? Looking at my own monthly outgoings and the shift to spending on subscription type services is obvious. We are about to find out how sticky these subscriptions are, both at the consumer and corporate level. During the next twelve months or so it will become obvious which companies actually have a competitive advantage, and which were being swept along by an era of cheap money.”
The bottom line
For investors, trying to time the market, pick investment opportunities, or move their money into cash could lead to less favourable results over the long term.
Placing your investments in the hands of an expert – and leaving your money invested over the long term, if you are able to – could be the wisest decision to make at this time.
As with all investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not get back all the capital originally invested.