Keep Calm And Carry On: Investing In Turbulent Times

Kristina Price, Investment Adviser at Craigs Investment Partners, takes us through the current economic landscape, the impact of a recession on investing and also the opportunities.

It seems like it’s hard to go past a newspaper these days without getting into a panic attack about the state of the world and the economy and that pesky “R” word. And although the media does often gravitate towards negative news during times of market volatility and potential recession, painting a gloomy picture of the economy, it’s important to keep a bit of perspective in amongst all those headlines.

Kristina Price points out that there are positive signs amidst the turmoil. “Inflation remains an ongoing challenge around the world, and a number of central banks have lifted interest rates again recently. However, we have seen positive signs that inflation has started to ease,” she explains. “The Federal Reserve in the US has recently hiked another 0.25% on its cash rate, but the move may be the final one in this cycle.”

In a nutshell, a recession occurs when an economy stops growing and starts shrinking, typically defined by two consecutive quarters of negative real GDP growth. Recessions are part of the broader economic cycle, and it’s inevitable that we’ll experience several of these during our lifetimes, reminds Price. “These corrections and these downturns are very normal in a market cycle. And every time there has been one we have recovered and the economy has recovered and markets have recovered.”

Still, a pragmatic view on history doesn’t always stop the panic and recessions can also lead to some physiological stress which can bring on some irrational and ‘knee-jerk’ decision-making. Price sees an important part of her role as helping act as a gatekeeper against bad ideas driven by panic during these moments.

“If you are feeling like you are getting a lot of anxiety and you feel like you might be in a bit of a panic mode, that’s when you should be leaning on your adviser for that help. That is what they’re there for. That is when they’re going to show their true worth. Go out to them, let them be that voice of reason to get you back on that path that you had originally set out on. Get emotions out of what you are trying to do and keep focused on those long-term goals that you’ve had.” Price often reminds clients that if their goals haven’t changed, then neither should their strategy.

And it’s easy to get caught up in the state of the wider economy but the reality is that we are all at different stages of our lives with different situations and different goals. And this is something that Price pays a lot of attention to.

“From the beginning, I want to understand what the client is trying to achieve, are they investing for retirement, or as a legacy for future generations? Are they wanting income generation, or capital growth, or just stability and reliability? From there I can construct a portfolio that fits the client’s risk tolerance and goals.”

It’s also important to keep in mind that market downturns can bring as many opportunities as they do challenges. Even historically expensive companies such as Apple, Microsoft, and Google are now presenting more affordable buying opportunities. Price attributes this shift in affordability to a change in the investment environment rather than a change in the companies themselves. “Those companies haven’t changed, just the environment that we have has changed.”

And it’s not just the flash tech sectors that this is happening with. “In the last four US recessions since the 1980s, we have seen that the two sectors that have been the most resilient are consumer staples and healthcare. On all four occasions, they both outperformed the broader market. So if you think about consumer staples, they’re a necessity, right? If you need shampoo or toilet paper, you have to buy them regardless of what’s going on. And the same goes for healthcare. If it’s a really stable sector, it’s often the last thing we would scrimp on if we were on a tight budget. So those two sectors are definitely the ones that are very defensive in this kind of market.”

Investors are also becoming more conscious of the environmental, social, and governance (ESG) practices of the companies they invest in. Price notes that there has been a significant increase in interest in sustainable investing, with investors seeking to align their investments with their values.

“There’s definitely been a huge surge in the interest in ESG investing, and I think that’s a reflection of people wanting to invest in companies that align with their values,” Price explains, emphasising that ESG factors can have a significant impact on a company’s long-term sustainability and success, making it an important consideration for investors.

Another big shift in investor sentiment and focus has been a cooling of our national love affair with property investing. Changes in rules, tax implications, and the more challenging lending environment with higher interest rates and falling property values are all factors that contribute to this shift. Additionally, property management can be labour-intensive for landlords, unless they can afford property managers. Liquidity is another aspect to consider – selling shares can be done within a few days, while selling a property can take months, especially in the current market. Price has noticed more inquiries from property investors wanting to diversify.

“For those who own a home, it’s important to remember that your house is your largest asset, with a significant amount of money tied up in property. Diversifying your investments through an asset allocation portfolio allows you to invest in various sectors, asset classes, and markets, avoiding the ‘all eggs in one basket’ situation. Investment portfolios can provide an alternative source of return when property is not performing as well as it used to. Of course, if you are in a position to invest in both property and a share portfolio, that could be a sensible approach. Nevertheless, I have seen a notable shift toward investment portfolios and share portfolios in recent times.”

Overall, investing during a recession can be challenging, especially when disposable income is limited. But Price encourages people to continue investing, even at a reduced level, to take advantage of lower prices and help reduce the impact of market volatility on their portfolios and for new investors not to be put off. “Investing a fixed amount of money at regular intervals, regardless of market conditions, can help reduce the risk of buying at the top of the market.”

And while getting into investing for new investors can be daunting at the best of times, expert advice from the likes of Craigs Investment Partners is accessible to all levels of investors.
“We offer a range of service levels tailored to different investor types and their desired advice level. Our services start with options for those looking to begin building wealth, where a simple $100 investment can get them started with monthly contributions and access to an adviser right through to our premium client services, which require a more significant lump sum and provide a more comprehensive advice package. What sets Craigs Investment Partners apart is our commitment to catering to all investors, regardless of their financial situation, ensuring there is a suitable service offering for everyone.”

And this commitment to catering to all investors also shows in the Women’s Wealth workshops run by Craigs Investment Partners, which Price is also a part of. The persisting pay gap between women and men, the extended time women spend out of the workforce for childcare, and the fact that women typically have longer lifespans, are factors that underscore the importance of empowering women to take control of their finances and begin investing.

“I am thrilled to empower women to invest and have been witnessing a growing trend of young women showing interest in learning about investing. It’s inspiring to see that investing is no longer just for the wealthy or a traditional old boys club, but for everyone.”

While all of this talk about turbulent economic times and the looming threat of recession can make for dramatically doom-filled news reports, it’s important to remember that there are also opportunities for growth, diversification, and alignment with personal values during times like this. Plus there is more accessibility of investing services for people at different stages in their financial journey, as well as the growing movement of women entering the investment world. And given the role that long-term investing has in helping shift the dial for equality, intergenerational wealth and opportunities, it’s really important to look deeper than shock headlines, seek pragmatic advice and to remember that you are not alone.

For more information on Craigs Women’s Wealth programme or to make an appointment with an adviser phone 0800 272 442 or visit craigsip.com.

Disclaimer: This article is general in nature and is not financial advice. It does not take into account your financial situation, objectives, goals, or risk tolerance. All investments involve risk and can go down as well as up. The Craigs Investment Partners Limited Financial Advice Provider Disclosure Statement can be viewed at craigsip.com/tcs. Visit craigsip.com.