Trading strategies for investors worried about rising recession risks

Countries such as the United States and Britain are grappling with inflation that has risen to multi-year highs as the war in Ukraine has led to soaring energy prices and rising food prices.

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Recession talk is heating up, with Wall Street veterans pointing to the rising risk of a recession — and offering advice on how to invest in this cycle.

Investment bank Morgan Stanley said that while a recession is not its base case, it is a bear market case because the risk of a recession “has risen substantially”.

“Needless to say, there are a number of shocks to the economy right now that could send us into recession sometime in the next 12 months,” the investment bank said in a report in May. It cited factors such as the Russian-Ukrainian war The upgrade could push oil prices to $150, an extremely strong dollar, and huge cost pressures for companies.

Wall Street veteran Ed Yardeni said in April that there was a 30 percent chance of a recession, Raised that figure to 40% last weekalthough Citi CEO Jane Fraser told CNBC She firmly believes that Europe is heading for recession.

The war in Ukraine has caused energy prices to soar and food prices to rise. The US and UK – and the rest of the world – are grappling with inflation that has risen to multi-year highs.

major stock indices has fallen sharply Since peaking in late 2021 and early this year, the Nasdaq is down about 23% since early 2022. The S&P 500 is down about 13% over the same period.

Here’s how frantic investors can weather the ongoing stock market volatility, experts say.

1. Buy these three sectors

As volatility will persist, Morgan Stanley recommended defensive sectors in its May 16 U.S. market outlook report. These include healthcare, utilities and real estate.

“Except for energy, all of the best-performing sectors have come from the defensive end,” Morgan Stanley wrote. “We don’t think defensive stocks will have much absolute outperformance, but they should offer some relative protection because we Calls for lower earnings and multiples will hit cyclical stocks harder.”

Defensive stocks offer stable dividends and yields regardless of overall stock market conditions, while cyclical stocks are stocks that can be affected by economic cycles.

Here’s how Morgan Stanley evaluates three defensive industries:

2. Be patient

3. Buy investment grade bonds