As the likelihood of a recession in the United States grows, more economists are pointing out the growing downside risks and offering advice on how to invest during this period. Many analysts are bearish in their forecasts as the US economy is experiencing multiple shocks today. Among the main risk factors, experts point out the escalation of the conflict in Ukraine, the rise in oil prices to $150 per barrel, the extraordinary strengthening of the dollar, as well as the strongest pressure on companies due to rising costs. In this difficult period of constant volatility in the market, economists advise the following: Buying shares in three defensive sectors Investment bank Morgan Stanley recommends investing in protective sectors: healthcare, utilities and real estate. In healthcare, stocks trade at a discount to the general market. The Bank favors large-cap pharmaceutical and biotechnology stocks as they trade at an attractive price and offer relatively large dividend yields. The real estate sector grew 42% last year and outperformed the broader US market by 16%. This sector provides stable income and dividends, in particular – protection against inflation through leases, rent increases and rising property values. The utilities sector provides relative protection against high costs (due to the established pricing structure in utilities) even against the backdrop of the effects of rising energy prices. Keeping patience Analysts are sure that during a recession special patience is required when using cash for any investment opportunity. A bear market can last for about a year and sometimes causes a drawdown of around 30%. Therefore, it is also important to diversify investments throughout the period. Purchase of investment grade bonds Another recommendation from experts is to buy quality bonds and avoid low-quality or high-yielding bonds.
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