Please Note: These claims are based on a long-term outlook. After considering many different approaches to a recessionary bear market, these all seem reasonable. The following does not constitute investment advice; all financial decisions involving risk of capital are made at the sole discretion of the individual and/or his financial advisor. I aim simply to provide ideas.
Safe: Commodities
Valuation Model: Monetary stimulus programs such as quantitative easing are typically pursued post-crisis in an effort to stimulate a shaken economy. Monetary stimulus activates inflation. Since the price of commodities is highly correlated to the real rate of inflation, monetary stimulus will cause commodity prices to rise.
Examples:
- Gold (highly undervalued)
- Silver (highly undervalued)
- Nonperishable Food (necessary for survival, contains real value)
- Clean Water
Some Risk: "Recession-Proof" Stocks
Valuation Model: Efficient Production, Increased Demand
Example1: Mining (HL, NEM, TAHO, AG)
- relatively cheap; huge growth potential
Example2: Consumer Staples (WMT, T, VZ)
- Strong cashflow and dividends, relatively stable
*Gold and silver have massive growth potential in recessionary events without the credit risk of stocks.
High Risk: Long-Term Options
Valuation Model: Based directly/inversely to price action of underlying security.
Examples:
$20 01/15/21 SLV Call [SLV currently @ 14.69]
$160 01/15/21 QQQ Put [QQQ currently @ 159.52]
Benefits: 10-20x potential leverage without margin, dynamic trade management
Downfalls: Expiration and theta decay; credit risk in case of ETF failure (unlikely)
All said and done, anything involving silver particularly interests me. I plan to implement a mixed strategy using all of the above. Here is a decade chart for SLV.
Other Resources:
https://www.thebalance.com/inverted-yield-curve-3305856
https://www.businesstimes.com.sg/government-economy/bis-warns-global-economy-risks-crisis-relapse
https://www.newsweek.com/alan-greenspan-fed-chair-warns-market-collapse-investors-run-cover-1264029
https://www.rt.com/business/446231-yellen-warns-corporate-debt/