Welcome to another week of trading! Today, we’re looking at some staples that investors can generally rely on to do well, even in a recession. After that, we’ll list the top fundamental events that you can trade this week. Let’s go!
Come rain or shine — 5 commodities that people always need
Recessions can cause consumers to drastically alter their purchasing behaviours. Rising costs and, potentially, less money in your pocket can sometimes do that to you.
That said, certain commodities have a canny way of avoiding such turbulence, selling well even when times are tough. Let’s explore, shall we?
#1 Pharmaceuticals and medicine
There are many sides to this one. From the general everyday creams, make-ups, and moisturisers to life-saving drugs and medicines. The pharmaceutical world never stops spinning, even if the economic one is experiencing a stutter.
Companies operating in the healthcare and pharmaceutical sectors — like GSK, Johnson & Johnson, and AstraZeneca — often experience sustained sales during recessions, making them a viable investment option even during an economic downturn.
#2 Precious metals
During periods of economic uncertainty, investors tend to run for the hills seeking safe-haven assets to protect their wealth. Enter precious metals.
Materials like gold and silver have historically served as stores of value. Their supply is limited and demand is always high, thanks to their many applicable uses — so their value tends to remain constant, or even appreciate over time.
Additionally, investors often choose these metals as a means of diversification and wealth preservation, leading to increased demand and potentially higher prices.
Toiletries are another essential commodity that people will always need.
Consumer behaviour may shift to buying cheaper brands during a recession, but some things never change. People still need to buy soap, toothpaste, and shampoo, whatever the economic weather. This means that consumer brands tend to survive tough times.
Historically, conglomerates with multiple variations of the same product — such as Procter & Gamble or Unilever — have prospered through recessions.
Recession or not, almost everything we do use, or even don’t use, is consuming some form of energy. It’s part of almost every aspect of our lives.
It’s true that when times are tougher, people may be more likely to drive around less or turn down the heating, but they still need to heat their homes, drive their cars and power their appliances.
As such, staple fossil fuels — such as coal, oil, and gas — are always in high demand.
#5 Water and food
This might sound like a no-brainer, but food and water are some of the most stable industries during a downturn.
During a recession, people may be more likely to buy cheaper, more basic foods and they will also shop around between stores comparing prices. But no matter their cost, these foods require crucial commodities to make. This can lead to an increase in demand for crops such as wheat, corn, and things like soybeans. Research also shows that consumers often turn to cheaper fast food options during a recession. These negate the need to purchase pricier health foods and the electricity needed to cook them.
…and a few things people drop in a flash
On the flip side, there are quite a few things that can tank during a recession, such as:
● Luxury goods — top-end cars, designer clothes and jewellery.
● Non-essential electronics — games consoles, TVs, smartphones.
● International travel — staycation, anyone?
● Real estate — high-interest rates are a major turn-off for anyone looking at a new mortgage.
What do you make of our list? Are there any other items you think people can’t live without? What would you trade in a recession? Let us know by tweeting us at @_contentworks!
Top fundamental events week commencing 22/05/23
Here are all of the main events coming up in what looks like a fairly busy week for the markets.
Monday, May 22
No major events are scheduled.
Tuesday, May 23
No major events are scheduled.
Wednesday, May 24
● NZD — RBNZ Press Conference
● GBP — Core Inflation Rate YoY;
● USD — FOMC meeting minutes
Thursday, May 25
● EUR — Germany GDP Growth Rate Final (Q1)
● USD — GDP Growth Rate QoQ 2nd Est
Friday, May 26
● USD — Core PCE Price Index for April; Durable Goods Orders MoM; PCE Price Index YoY; Michigan Consumer Sentiment Final (May)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team