Where to look during Recession
Global Recession
National Statistics office (http://www.statistics.gov.uk/default.asp) confirmed last week that UK economy is in recession. This is little comfort to many small businesses and households that have felt the pinch for the past 6 months.
The immediate question on everyone's mind at the moment is how long will this recession last and when will we be able to spot "green shoots"?
Depending on who you ask it is ranging from 1 to 5 years. No one has a crystal ball to predict the severity of the recession, 5 years may seem excessive, however it is a true reflection of the time taken for the housing market to recover after previous recessions.
The stock markets will start showing signs of recovery before the housing market. Simple things to look out for are higher Consumer Confidence in the USA, fewer housing repossession (foreclosures) and most importantly stability of the banks and increased lending/liquidity.
By following the GDP (Gross Domestic Product) of the leading economies, USA, UK, Japan, Germany, China etc. the long term private investors can keep abreast of the global economic conditions.
Nationalisation
RBS will not be the only organisation that the government will have to nationalise during 2009. They may proceed to nationalise manufacturing companies in order to keep unemployment at bay and and to ensure money flow into the economy.
The main setback for private investors who have shares in nationalised companies is the lack of dividends and the heavy decline in share price in the last 12 months. There are many investors and SIPP owners who did not sell in time resulting in areas of there portfolio that is almost worthless for the immediate future.
RBS traded at 800p in May 2007 and now its at around 15p that's around 53 times less than the peak. This highlights the importance of diversification in order to reduce the risk to your portfolio during draw downs.
Resilient Sectors During Recessions
The majority of sectors will contract during the economic downturn however consumer staples and utilities are normally considered to be defensive play and should buck the trend.
Companies that are in tobacco, pharmaceuticals, electricity, gas and food sectors can be added to your portfolio to reduce exposure to the downside.
Stocks in these sectors are unlikely to increase in value such as Google, Dell etc. however they will pay regular dividends and are most likely to survive the contraction in the economic cycle.
Tobacco (NMX3780)
Components
Pharmaceuticals & Biotechnology (NMX4570)
Components
Electricity (NMX7530)
Components
Gas Water & Multi utilities (NMX7570)
Components
Oil & Gas (NMX0530)
Components
Food & Drug Retailers (NMX5330)
Components
FTSE100
The FTSE has been in a large range from November 2008 until now. Key Resistance areas, marked as green lines have to be broken. Target 4, around the 5640 area will signal a bull market. Currently the bears are in charge and the market has a higher probability of going south towards the 2500 level.
Fundamental announcements that affect the economy will be the catalyst to determine the final push for the bulls or bears.
If you are trading the FTSE, take care and ensure that your money management rules are not violated.
Virtual Portfolio
If you are a novice investor its worth familiarising yourself with Yahoo Finance (http://uk.finance.yahoo.com/) and set-up a virtual portfolio.
You need to have a Yahoo Mail Account, which takes a few minutes to set-up then you simply goto Yahoo Finance and select My Portfolio.
National Statistics office (http://www.statistics.gov.uk/default.asp) confirmed last week that UK economy is in recession. This is little comfort to many small businesses and households that have felt the pinch for the past 6 months.
The immediate question on everyone's mind at the moment is how long will this recession last and when will we be able to spot "green shoots"?
Depending on who you ask it is ranging from 1 to 5 years. No one has a crystal ball to predict the severity of the recession, 5 years may seem excessive, however it is a true reflection of the time taken for the housing market to recover after previous recessions.
The stock markets will start showing signs of recovery before the housing market. Simple things to look out for are higher Consumer Confidence in the USA, fewer housing repossession (foreclosures) and most importantly stability of the banks and increased lending/liquidity.
By following the GDP (Gross Domestic Product) of the leading economies, USA, UK, Japan, Germany, China etc. the long term private investors can keep abreast of the global economic conditions.
Nationalisation
RBS will not be the only organisation that the government will have to nationalise during 2009. They may proceed to nationalise manufacturing companies in order to keep unemployment at bay and and to ensure money flow into the economy.
The main setback for private investors who have shares in nationalised companies is the lack of dividends and the heavy decline in share price in the last 12 months. There are many investors and SIPP owners who did not sell in time resulting in areas of there portfolio that is almost worthless for the immediate future.
RBS traded at 800p in May 2007 and now its at around 15p that's around 53 times less than the peak. This highlights the importance of diversification in order to reduce the risk to your portfolio during draw downs.
Resilient Sectors During Recessions
The majority of sectors will contract during the economic downturn however consumer staples and utilities are normally considered to be defensive play and should buck the trend.
Companies that are in tobacco, pharmaceuticals, electricity, gas and food sectors can be added to your portfolio to reduce exposure to the downside.
Stocks in these sectors are unlikely to increase in value such as Google, Dell etc. however they will pay regular dividends and are most likely to survive the contraction in the economic cycle.
Tobacco (NMX3780)
Components
- British American Tobacco (BATS)
- Imperial Tobacco (IMT)
Pharmaceuticals & Biotechnology (NMX4570)
Components
- Hikma Pharmaceuticals (HIK)
- Glaxo Smith Kline (GSK)
- Shire (SHP)
- Aztrazeneca (AZN)
Electricity (NMX7530)
Components
- Scotish & Southern Energy (SSE)
- DRAX Group (DRX)
- BritishEnergy (BGY)
- International Power (IPR)
Gas Water & Multi utilities (NMX7570)
Components
- National Grid (NG)
- Severn Trent (SVT)
- Centrica (CNA)
- Pennon Group (PNN)
- Nortumbria Water (NWG)
- United Utilities Group (UU)
Oil & Gas (NMX0530)
Components
- BG Group (BG)
- British Petroleum (BP)
- Heritage Oil (HOIL)
- Melrose Resources (MRS)
- Premier Oil (PMO)
- Royal Dutch Shell-B (RDSB)
- Salamander Energy (SMDR)
- Tullow Oil (TLW)
Food & Drug Retailers (NMX5330)
Components
- Greggs (GRG)
- Morrisons Supermarket (MRM)
- Sainsbury (SBRY)
- Tesco (TSCO)
FTSE100
The FTSE has been in a large range from November 2008 until now. Key Resistance areas, marked as green lines have to be broken. Target 4, around the 5640 area will signal a bull market. Currently the bears are in charge and the market has a higher probability of going south towards the 2500 level.
Fundamental announcements that affect the economy will be the catalyst to determine the final push for the bulls or bears.
If you are trading the FTSE, take care and ensure that your money management rules are not violated.
Virtual Portfolio
If you are a novice investor its worth familiarising yourself with Yahoo Finance (http://uk.finance.yahoo.com/) and set-up a virtual portfolio.
You need to have a Yahoo Mail Account, which takes a few minutes to set-up then you simply goto Yahoo Finance and select My Portfolio.
posted by Bull Kicker at
17:56
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