Is recession round the corner? Don’t Panic!!!Richa Varu Rathod
During a recession, we experience an economic slowdown which leads to market volatility. But, there’s a wrong assumption that every stock experiences only losses at this time.
Let’s look at a few sectors that have performed well during a recession historically.
No one stops brushing their teeth or washing their clothes even during a recession. Stocks associated with FMCG products like toothpaste, soaps, shampoo, detergent, etc continue to make revenues. Sure, the frequency of such purchases might decrease, but such activities don’t come to a halt.
As the population’s income declines, they start preferring inexpensive items. After all, consumer staples and essentials need to be purchased from somewhere. Thus, supermarkets, discount, and grocery retailers continue to make some revenue during this period.
The demand for alcoholic beverages is almost unaffected by economic cycles. Since the demand remains similar, revenues and profits remain similar too.
Cosmetics and Apparel
While we may think consumer discretionary spending reduces in recessions, the apparel, and cosmetic sector witnesses a rise based on an interesting theory called “The Lipstick Effect”. According to this theory, people prefer treating themselves with small indulgences in periods of stress. Larger indulgences seem expensive; hence they move towards smaller items like lipsticks and clothes.
While we speak about these sectors, it’s important to understand that no business can be completely unaffected by the impact of a recession.
Every stock has a company behind it. And if companies make losses, it will directly or indirectly affect their stock price.
We, at Asset Multiplier, try to protect the principal capital of our clients in such volatile markets. We can help blunt the blow of recession by balancing your portfolio.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”