With Lunar New Year around the corner, preparations have been in full swing to welcome the Year of the Rabbit on 22 January. Friends and families will gather for feasting and festivities in homes decorated with red lanterns and door couplets of best wishes, and the young people will be looking forward to having their pockets filled with red packets from their elders.
Red packet or red envelope, containing cash money, symbolizes good blessing and fortune, and is a Lunar New Year gift that everyone would be delighted to receive. But perhaps a more important questions is – what would you do with the red packet money? While it’s natural to just splurge it away, there are other sensible ways of getting more value out of the many red packets to collect during the festival, especially in this troubling economy.
Positive and festive vibes aside, however, there are worrying signs of the global economy as we enter the new year. Almost two-thirds of chief economists surveyed by the World Economic Forum expected there will be a recession in 2023 . The World Bank also slashed its 2023 growth forecasts to 1.7%, the slowest pace outside the 2009 and 2020 recessions since 1993, which is teetering on the brink of recession for many countries, following the intensifying interest rate hikes and unending Russia-Ukraine conflict .
- In anticipation of potential economic downturns forecasted for 2023, those receiving red packet money during the Lunar New Year might consider investing in recession-resistant industries such as consumer staples, communications, IT, and healthcare, which tend to experience minimal fluctuations during recessions.
- Precious metals like gold and silver are traditionally viewed as safe havens during economic uncertainty and can be a prudent investment choice; with options including physical metals, precious metal currency investments, gold ETFs, and gold mining stocks.
- The Swiss Franc and Japanese Yen are seen as stable currencies during economic turbulence due to Switzerland’s strong financial system and Japan’s status as the world’s largest creditor nation, offering an alternative safe haven for investors considering currency investment.
What Is A Recession?
The global economy moves in phases like waves on the ocean. It goes through periods of expansion and contraction. During periods of economic expansion, income, sales, production, and employment rise to great heights. However, during economic contraction, the reverse happens; income, sales production, and employment drastically decline . The contractionary phase is also known as a recession.
Although a recession can be a turbulent period, the good news is that the mean duration of recessions (in the US) since World War ll has been just around 11 months, compared to expansionary periods which can go on for years .
If you are going to receive plenty of red packets full of cash blessing from your friends and families in the upcoming Lunar New Year, why not read on to find out the three ways you can do to make more value out of the red packets in times of this impending economic downturn. You may consider the following:
1. Invest in Recession-Resistant Industries/Shares
Recession-resistant industries are not necessarily recession-proof industries.
As an economy goes through a recession, almost all sectors will be impacted, though the degree of impact will vary. Recession-resistant industries have minimal fluctuations through economic phases, making it a go-to for investors to tide through economic downturns. A few examples of such industries include consumer staples, communications, information technology, and healthcare .
2. Invest in Precious Metals
As an economy goes through a recession, there will be an air of uncertainty and fear.
Hence, investors could turn their attention to precious metals for financial assurance. Precious metals such as gold and silver have held its value across long periods of time, and this provides a form of protection against contractionary economic phases. Hence, the value of precious metals tends to rise when investors deem there is too much fear, uncertainty, and doubt in an economy .
There are many ways to invest in precious metals such as purchasing physical metals, precious metal currency investments, gold ETFs, and gold mining stocks. Vantage offers precious metals currency investment in the form of gold, silver and copper trading that allows investors to take advantage of long-term positions to hedge against possible recession.
3. Invest in Offshore Currencies
Precious metals aren’t the only safe havens around. There are also certain currencies that can also provide investors a shield against periods of economic fear such as a recession.
Theoretically, the Swiss Franc has earned its safe haven status for having a relatively stable and neutral government with strong financial system, while the Japanese Yen as a safe haven is driven by its strong trade surplus and status as the world’s largest creditor nation. .
The status of the Swiss Franc is underpinned by a strong governance, financial and banking system, coupled with political neutrality and high levels of confidence in the country’s central bank. Japan on the other hand has a trade surplus, exporting more than it imports. Hence, the Bank of Japan often devalues the Yen intentionally to facilitate more international trade exports, making Japan’s currency stable even in times of economic turmoil .
Vantage offers Forex CFD trading for both the Franc and Yen as USDCHF and USDJPY respectively, with spreads as low as 0.0 and leverage of up to 500:1.
Although there is no absolute certainty that a recession will hit in 2023, there have been worrying signs with the global economy in consensus of expert opinions. It is always better to be prepared for a rainy day and your red packet money could be a good start.
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- “How can businesses prepare for economic turbulence in 2023? Chief economists give their views – World Economic Forum” https://www.weforum.org/agenda/2023/01/chief-economists-outlook-business-prepare-recession-davos-2023/ Accessed 10 Jan 2023
- “World Bank warns global economy could tip into recession in 2023 – Reuters” https://www.reuters.com/markets/world-bank-warns-global-economy-could-easily-tip-into-recession-2023-2023-01-10/ Accessed 10 Jan 2023
- “Business Cycle: What It Is, How to Measure It, the 4 Phases – Investopedia” https://www.investopedia.com/terms/b/businesscycle.asp Accessed 10 Jan 2023
- ” What is a Recession? 10 Facts You Need to Know – Kiplinger” https://www.kiplinger.com/slideshow/investing/t038-s001-recessions-10-facts-you-must-know/index.html Accessed 10 Jan 2023
- “Industries That Can Thrive During Recessions – Investopedia” https://www.investopedia.com/articles/stocks/08/industries-thrive-on-recession.asp Accessed 10 Jan 2023
- “Safe Haven: Definition and Examples in Investing – Investopedia” https://www.investopedia.com/terms/s/safe-haven.asp Accessed 10 Jan 2023
- “Why Are JPY and CHF Considered Safe Haven Currencies? – Earnforex” https://www.earnforex.com/guides/why-are-jpy-and-chf-considered-safe-haven-currencies/ Accessed 10 Jan 2023