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Quick Thought Of The Week: “R”

I can’t even count the number of times I have seen and heard the “R” word mentioned in recent months. Commentator after commentator are now talking about recession as though it is a forgone conclusion.

Perhaps they are right. Perhaps the global economy has run out of juice. Perhaps corporate earnings have finally peaked. Perhaps the Trump tariffs have disrupted China’s supply chains so badly that they could drag the global economy down with it.

Perhaps that last increase in interest rates by the US Federal Reserve was the straw that finally broke the backs of consumers and corporations that have borrowed too much.

Perhaps concerns that the European Central Bank has concluded its bond-buying programme will pull the rug from under the legs of bull market.

Perhaps the inversion of the US yield curve could prove to be correct, yet again. Long-term interest rates should not be lower than near-term rates, unless growth starts to slow.

But here’s the thing: recessions are nothing new. They are a sign that economies might have grown too quickly. So, perhaps it is time to take a breather.

But it’s also not a time to stop investing. Definitely do not stop investing, despite what some experts might say.

If you are concerned about your portfolio, then focus on the things that consumers must buy, regardless of prevailing economic conditions. I call it the burgers, fries and aspirin strategy….

These are the stalwarts of the stock market. They are not sexy. They won’t make you rich overnight. They probably don’t even get much of a look-in most of the time.

But they make the kinds of things that we have to buy, come what may.

The aspirin might come in handy when the continuous droning about recession gets to be too much. The burgers or their equivalent are the things we eat regularly. And finally, I just like fries!

A version of this article first appeared in Stock Advisor.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.