Trump tariff is now real.
It's widely expected that the tariff could start global trade wars and push US and many countries in the world into recession.
Recession is a phase where the economy declines often marked by falling GDP, reduced economic activity and lesser consumer spending.
Here are top 5 things we as investment managers recommend.
1. Sell your aggressive portfolio: During uncertain times aggressive equity bets that have long holding period tend to perform worst. It's better to move to stable funds especially large caps and sectors that are counter cyclical like utility and pharma
2. Invest in longer term debt: Recession is marked by central banks cutting interest rates in pursuit of boosting consumptions and borrowing. They ideally want to discourage savers and promote risk takers. There it's a good strategy to add longer dated bonds funds in your portfolio as the bond prices will go up when the interest rates go lower.
3. Reduce global diversification: When the world economies get into recession it's better to look inward than outwards. It's better to stay invested in India and reduce our overall global exposure. This will give us a better hold on the portfolio.
4. Stay away from leverage: A lot of investors tend to believe this timing is great and borrow funds from the markets to invest. This should be strictly avoided. No amount of value in a fallen market is worth taking a risk on.
5. Pay up loans: Times like these often confuses investors. Should I repay some loan or buy equity for quick gains. Don’t even think once. Please repay your loans as quickly as possible.
The recession phase could be characterized by long duration, painful period of equity returns and risk off trade across the globe. While you can add SIPs, lumpsum investments should also be spread over longer duration.