What? no mention of Gold?The best protection against a recession is cold hard cash.
I guess so - but shouldn't Value companies offer some protection?The worst would be growth companies (what is a recession only the curtailing of economic growth?)
I would have thought that agricultural produce would always be in demand and would be classed as a soft commodity - though I have to admit that I'm still getting to grips with classifications of sectors/produce etc.or commodities of any ilk hard or soft.
Still, I would say even you have concerns about The China BubbleDon't worry too much about people trumping a significant market correction. For as long as you hear such proclaimations being made regularly the markets are pretty safe.
What? no mention of Gold?
I guess so - but shouldn't Value companies offer some protection?
I would have thought that agricultural produce would always be in demand and would be classed as a soft commodity - though I have to admit that I'm still getting to grips with classifications of sectors/produce etc.
Still, I would say even you have concerns about The China Bubble
The best protection against a recession is cold hard cash.
But on the other hand if hyper-inflation kicked it you will be in trouble...
Growth stocks have historically done better than value stocks in a recession.
Growth is currently "cheaper" than value particularly large cap growth. Large caps generally do better than small in a downturn. I think the best risk/reward is in large cap growth.
I think at this level(of the dollar) the US is relatively appealing, Japan should benefit if the carry trade unwinds and if you are worried about a downturn go easy on emerging markets.
Growth stocks are defined as those with above market average earnings growth. Growth stocks tend to be in rapidly growing sectors or else hold a niche in a slower growing sector. Their earings growth is usually NOT dependent on overall economic growth.
On the other hand value stocks are those with below market earnings growth. They tend to be in mature sectors or mature companies in rapidly growing sectors. They tend to be highly leveraged to the economic cycle.
Compare British Airways and Ryanair. Throughout the 90s and 00s Ryanair was the classic growth stock and BA was the value play. In the downturn after 9/11 which company was able to shrug off the downturn in air travel and increase profits every year?(RYA). Which of the two fell into a loss in 01 to 03?(BA)
On the other hand which has done better in the upturn that happened since( 03 to 06)(BA!).
Because of their better earnings growth outlook Growth tends to be priced on a higher P/E, Price/Book(NAV) and price/sales. However occasionally when value stocks outperform growth their valuation may come closer than the historical differential. I believe than has occured at present which is why I said that growth was "cheaper"than value.
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