Writing her first column in the AFR for 2023, Tribeca’s Jun Bei Liu explains the important role that stock selection plays when recession proofing a portfolio.
Every recession is different in terms of the drivers, the length, the depth and of course, the speed at which the economy can recover.
As we move into the new year, the consensus is for recession in the US, Europe, and UK, but that Australia will avoid this outcome. This is encouraging news for domestic investors but recession or not, Australia’s economic outlook will deteriorate meaningfully.
This means there is likely to be further downside for equity markets and a continuation of the stomach-churning volatility that has accompanied the period during which the Reserve Bank of Australia has been raising interest rates.
Even for an optimist, it’s probably too early to look through the economic downturn that is on the cusp of unfolding. This is because the economy and corporate earnings are closely linked, meaning as economic growth weakens, unless there are positive margin offsets, so too will earnings.
The views expressed are her own and do not consider the circumstances of any investor.
