As the coronavirus continues to spread and claim lives across the world, the markets have plummeted and people in the “informal economies” of the world are without work or food. As we wrote in our article, How Far Could Stocks Fall, we reminded our readers that the stock market crash that started in 1929 did not end until 90% of market value was gone three years later. The economy was further damaged by an ill-advised trade war (Smoot Hawley Tariff) and the evaporation of credit. Historians may decide in years to come that the lessons learned in countering the Great Recession were crucial in dealing with the Coronavirus Recession or Depression.
How Long Will the Coronavirus Recession Last?
The New York Times writes that the recession caused by the virus could be much worse and longer lasting that any have so far expected. The problem is not just that world is steeped in debt and equities have been overpriced but that in order to stop the spread and damage of the virus the world simply needs to shut down!
The pandemic is above all a public health emergency. So long as human interaction remains dangerous, business cannot responsibly return to normal. And what was normal before may not be anymore.
People may be less inclined to jam into crowded restaurants and concert halls even after the virus is contained.
The abrupt halt of commercial activity threatens to impose economic pain so profound and enduring in every region of the world at once that recovery could take years. The losses to companies, many already saturated with debt, risk triggering a financial crisis of cataclysmic proportions.
“I feel like the 2008 financial crisis was just a dry run for this,” said Kenneth S. Rogoff, a Harvard economist and co-author of a history of financial crises, “This Time Is Different: Eight Centuries of Financial Folly.
They go on to say that the problems will be worse in the developing world where credit and investments have suffered in the last year.
Investors live with the hope that as the crisis of infections and death recedes, such a huge degree of pent up demand will emerge that economies will recover quickly.
Unfortunately, many businesses will be out of money as will consumers. Bankruptcies will common and many that do not simply go under will not have the resources to ramp up quickly. This crisis will affect buying habits, social activities, and risk tolerance for at least a generation to come.
Safe Investments for a Ten Year Recession
What can an investor do if the recession is going to last a decade or more? We recently wrote about dividend stocks to weather the market slump. But, are these or any other investments sufficient to weather the storm that is here, building, and due to last for a long time?
Secure Investments for a Recession
Investopedia writes about the standard portfolio investment strategy for the recession.
The key to investing before, during, and after a recession is to keep an eye on the big picture, rather than trying to time your way in and out of various market sectors, niches, and individual stocks. Even though there is a lot of historical evidence for the cyclical nature of certain investments during recessions, the fact of the matter is that timing such cycles is beyond the scope of the retail investor.
Investing in companies that sell consumer goods is always a good idea because food, cleaning products, and even beer are the last things that people will quit spending on when times get tough. Companies that support the infrastructure like utilities also have steady income and are likely to be bailed out in hard times.
Investments for a Recovery
Although we believe that the recession will be longer and deeper than many have feared, we also agree that there will be a recovery. Those companies that survive intact and have the assets to ramp up production as well as R&D will do the best. And, companies like Amazon.com with its home delivery system will likely be well positioned to take over more of the retail sector.
Companies with the Most Cash on Hand
24/7 Wall Street lists the American companies with the most cash.
- Microsoft: $136 billion
- Berkshire Hathaway: $128 billion
- Alphabet (Google): $121 billion
- Apple: $106 billion
- Facebook: $53 billion
- Amazon.com: $43 billion
- Ford: $37 billion
- Oracle: $35 billion
- Cisco: $33 billion
- Bristol-Meyers Squibb: $32 billion
These companies are likely to survive an extended recession intact and be positioned to grow during the eventual recovery.
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