THE ANALYSTS: ‘Cash is king’ in a recession

“Cash is king. Going into a recession you’ll need to have cash to take advantage of opportunities,” declared Greig Lindo, Assistant General Manager of Trading and Treasury at JMMB.

Speaking on Taking Stock with Kalilah Reynolds, Lindo said that during a recession, investors should consider companies whose demand will not diminish even with decreased economic activity.

His comments follow speculation from analysts that a recession in the United States is imminent. A recession is generally defined as two consecutive quarters of negative economic growth. The US has already recorded one quarter of negative growth.

CEO of Profit Jumpstater, Keisha Bailey explained that there has been increased talk of a recession in the United States because the US Federal Reserve, which is that country’s Central Bank, has taken an aggressive approach at increasing interest rates.

“We’re seeing globally interest rates across different countries are increasing, not just Jamaica and the US, but Canada, the United Kingdom as well, because globally inflation is a problem,” Bailey said.

She said that Central Banks around the world have been targeting inflation as the measure of economic growth. Interest rates are one of the main tools that they have to combat inflation.

“The skill in it is the pace at which Central Banks increase the rate. If they go too fast then they can stifle growth in the economy and if they go too slow, they have no impact on inflation,” she explained.

She explained further that American analysts are predicting another quarter of negative growth because of the fear that the Fed is increasing interest rates too quickly. The Fed raised interest rates by 50 basis points earlier this month.

On the other hand, Bailey noted that economic activity in Jamaica has been performing well and the Bank of Jamaica has taken an aggressive and proactive approach in combating inflation. For those reasons, she said the country is not currently at risk of a recession.

When America sneezes…

However, Lindo noted that a recession in the US could have ramifications on Jamaica, because the US is one of the country’s main source markets.

“If the US goes into recession then we have to reasonably expect that to play out in the Jamaican market because we’re very dependent on the United States,” he said.

For investors looking to cushion themselves against the impacts of a US recession, Lindo said that being able to take advantage of the right opportunities will be essential.

“You don’t want to be going into a high interest rate environment using things like leverage, because it’s gonna cost you a lot more,” he said.

He said in the event of a recession, investors should stay away from companies that deal in goods that are discretionary, meaning they are more wants than needs.

Bailey added that investments in commodities such as gold, silver and oil are safe bets to hedge against downturns.

END

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Sashell Williams2024-09-03T21:40:31-05:00