Weekly Buzz: 📉 Returns during a recession aren’t as bad as you think

Over the past century, recessions haven’t been that bad for investment returns – yes, you read that right. In the two years following the start of a recession, stocks actually tend to perform pretty well, on average showing a solid annualised return of 8.8%.

What does the data say?

Now, we aren’t saying that a recession will happen soon (it’s more of a stagflation situation at the moment). But the data here is rather interesting, showing that, on average, returns during a recession might actually be better than you think.

Think about it this way: if you invested $10,000 at the start of a recession, you’d still have roughly $11,664 after two years, on average. Simply put, it’s safe to say that history suggests sticking with stocks often pays off.

And remember that the markets are savvy – stock prices drop even before a recession begins. In the US, the stock market peaks, on average, about 5 months before a recession starts. It’s tempting to play it safe, pulling your money out of the market before a recession, but timing the market tends to be a losing game.

What’s the takeaway here?

It’s natural to worry about economic downturns, and about how it might affect your investments. But recessions are just one part of the overall market cycle (find our Jargon Buster below for a quick runthrough!).

When a recession runs its course, economies usually start expanding again – after rain often comes sunshine. If you were to zoom out, you’d see that most economies tend to grow over time, with each peak reaching a higher high than the last.

As always, a well-diversified portfolio, like any of our General Investing portfolios, is probably your best bet, recession or not. Plus, our General Investing portfolios take into account current economic conditions – leaning more into defensive assets in the face of market uncertainty.

📰 In Other News

A stutter in Asia's manufacturing step

According to data released last week, manufacturing activity across Asia slumped in October. Several Southeast Asian countries and their industries have been squeezed by rising costs and lagging orders, according to S&P Global’s manufacturing purchasing managers’ indexes (PMI).

Japan and South Korea also had little to show off: they scored 48.7 and 49.8 respectively in their PMIs, which is still below the 50-mark that indicates expansion in the manufacturing sector.

Asia’s usually the powerhouse of manufacturing, but lowered demand from the US and Europe has made business difficult. The rest of the world will feel the effects if Asia runs out of steam, and higher energy prices aren’t helping matters either.

And while China’s slower recovery is still making investors nervous, its government isn’t just sitting idly by – so far it’s taking measured steps to support its economy. If continued supportive policies yield results for the world’s second largest economy, it's likely to also bring about positive ripple effects for the rest of the Asian economies.

This article was written in collaboration with Finimize.

🎓 Jargon Buster

Market cycles

Market cycles are like an economic Ferris wheel. When the economy is on the upswing, it’s like being on a seat that’s rising to the top – businesses grow and jobs are plentiful. Then you reach the peak, where things can’t go much higher. So, we head into a downturn, or a recession. But once you’re at the bottom, you’re looking at a climb up once again.

These cycles are normal, and they make the economic world go round – quite literally!

✈️ 9 new ETFs with our Flexible Portfolios!

Ready for takeoff? We're thrilled to introduce 9 new ETFs in our Flexible Portfolios! 

From the vibrant economies of India and Vietnam to sectors within the S&P 500, depart for a wider world of ETFs. Now with over 60 ETFs to choose from, you can tap into the growth of even more regions and industries.

Just mix and match to build a portfolio that works for you – they’re just that flexible.

🗓️ Save the Date

COP28 is coming to Dubai this year. How can you be part of the global movement for a cleaner and greener planet? 

Happening on 15 Nov (Wed), this webinar will explore investment opportunities in the thriving Electronic Vehicle (EV) sector and carbon markets. Hear from experts at KraneShares and learn how eco-friendly investments can fit into your portfolio! 

✨ Featured in App

⬆️ Give your cash the upgrade it deserves! 

Unleash the power of your savings with our ultra-low-risk cash management solution! Enjoy a projected 4.5% p.a. return (net of fees) without the hassle of lock-in periods or minimum investment amounts. Simple’s returns are closely tied to interest rates, so when rates go up, so does Simple’s ability to earn more on your cash. 

Whether you’re building up your emergency fund, saving up for an upcoming expense, or putting aside funds to dollar-cost average into your investment portfolios, Simple keeps your cash secure in even the most volatile market environments. Experience the freedom of flexible saving and watch your money work smarter, not harder. Start today and transform any amount into an earning opportunity – because it's that simple.

StashAway Simple™ is only available on your mobile app. Find out more about it here.