Is A Double-Dip Recession Coming Globally?

The year 2020 has already witnessed a global recession with the novel coronavirus pandemic triggering economic standstill.

The world is gradually crawling back to normalcy.

This is clear from the Global Purchasing Managers Index.

As the chart below shows, the world economy plunged into recession earlier this year. However, the recovery has been swift.

As of September 2020, the composite global PMI was 52.1. A reading above 50 indicates economic expansion.

However, the impact of the COVID-19 pandemic is far from over.

Most European countries are likely to enforce another lock-down. Recently, the United Kingdom announced a one month lock-down. Germany, France and Belgium have already announced a second lock-down.

It would imply that economic activity would significant decline again in the European Union.

It’s a globally synchronized world and weak growth in Europe will impact other regions as well. Additionally, the novel coronavirus cases have been surging in the United States.

With winter round the corner, there are fears of cases accelerating. Another lock-down in the United States will certainly ensure a global recession.

Currently, the U.S. recession probability, as indicated by the Treasury spread, is not very high. This could change suddenly if another lock-down is imposed.

Investment Strategy

With the elections due and with the second wave of the coronavirus pandemic, the global financial markets are likely to be jittery.

I would advise some profit booking in risky asset classes. Investors can increase their exposure to cash, gold and silver.

At the same time, it makes sense to invest in some low beta stocks and investment grade corporate bonds. A good example of a low beta stock is Walmart. Another good name from the retail sector is Costco Wholesale.

It’s worth noting that another recession would imply more money printing from central banks globally. This is good news for cryptocurrencies. Possibly, one of the reasons for Bitcoin showing strong momentum in the recent past.

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