What investments should you buy when a recession is ending?

Investing
December 6, 2018

It goes without saying, the ideal time to buy shares is when they’re at a low point, and selling them when they’ve increased in value. ​

Some investors do this by watching a country’s economic cycle.

If you’re clever, you can identify the stage of the economic cycle you’re in, and purchase your shares in the economic cycle that they’re most likely to be lower in value.

Here is an explanation of what a recovery is, and which industries to consider (or avoid) buying investments in.

A recovery happens when real GDP picks up from the trough reached at the low point of the recession.

A recovery might follow a deliberate attempt to stimulate demand.

Some key indicators in the U.K. have been:

  • cuts in interest rates – the policy interest rate fell to 0.5% in the Autumn of 2008 and they have stayed at this low level since then
  • a rise in government borrowing, and / or
  • ‍a policy of Quantitative Easing (QE) by the Bank of England to pump more money into the banking system in a bid to increase the supply of loans – now worth more than £375 billion.

What's the best industries to invest in during this time?

Specifically, interest-rate-sensitive sectors—such as consumer discretionary and financials— historically have outperformed the broader market, during these times. These sectors have performed well, due in part to industries within the sectors that typically benefit from increased borrowing, including diversified financials and consumer-linked industries such as autos and household durables in consumer discretionary.

Elsewhere, economically sensitive sectors, such as industrials, such as transportation, have been boosted by shifts from recession to recovery.

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