Jakarta, CNBC Indonesia – If the recession hit many countries around the world, what impact would society have? Indonesia’s exports will be shaken due to the sluggish world market.
Exports alone contributed 23% to economic growth in the first quarter of 2022. The drop in exports due to the global recession will surely cut Indonesia’s GDP. Especially in the event of a recession, it will be difficult to sell assets at the best price. Because people’s purchasing power was slow at that time.
So, if you look at current conditions, the recession was triggered by an aggressive hike in central bank interest rates. So that it can raise the credit interest rates which make the debt more expensive.
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On the other hand, deposit rates can also rise, which makes investing in banks more profitable than investing in risky assets that will be affected. Hence, people’s purchasing power will be affected due to the reduction in income, which risks increasing the poverty rate.
Analysts provide advice on divesting investments as the world enters a recession. Faced with the threat of a recession, Anthony Watson, founder and president of Thrive Retirement Specialist in Michigan is said to suggest divesting.
According to him, in a recession, value stocks or stocks that are believed to be priced too low for their financial performance will be more profitable than growth stocks.
“Value stocks tend to outperform growth stocks when they enter a recession,” said Watson as reported by CNBC International, quoted Friday (7/15/2022).
In addition, he also suggested considering investing assets in bonds, because in addition to being safer than stocks, the yields offered are now quite high.
The increase in interest rates by the central bank causes bond yields to tend to rise. This obviously offers advantages, especially bonds are safer assets than stocks.
In addition to bonds, gold, which has traditionally been a hedge against inflation, can also be an investment option. By early March, gold had jumped to USD 2,069 / troy ounce and nearly broke its all-time high.
However, it is only slow afterwards and is now trading close to US $ 1,800 / troy ounce. If the world goes into recession, especially if central bank policies fail to bring inflation down quickly, gold has the potential to bounce back.
The three types of investments mentioned above are moderate. However, it is possible to invest in risky assets such as stocks.
When there is a recession, stocks that have good fundamentals can be an option. Looking at the company’s fundamentals, it can be from its financial performance, business, risk management during a crisis by its management, to the company’s resilience in dealing with various crises.
Furthermore, you can also invest in mutual funds. Mutual funds can be considered “palugada” investments, aka “you want me there”. Because mutual funds offer a variety of low to high risk investment tools and medium to long term investment tools.
There are money market mutual funds that have minimal risk and are suitable for investments of less than 1 year. Hence, fixed income mutual funds or bonds are suitable for 1-3 year investments. Mixed mutual funds suitable for those who love moderate risk. This mutual fund can be invested for 3-5 years. If you want to be more risky, you can choose equity mutual funds that are suitable for long-term investments or more than 5 years. Ah
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(RCI)
