A global recession could be coming. Here’s what to do with your ASX shares

The boss of the International Monetary Fund (IMF) this week let slip that it would downgrade its global economic growth forecast next month.

Rising energy prices, other supply shortages, and inflation arising due to the Russia-Ukraine conflict is starting to bite, especially in Europe.

“What we were striving for is for growth to go up and the inflation that has become a problem to go down,” IMF managing director Kristalina Georgieva told an online forum. 

“Instead, we have the exact opposite. Growth is going down, inflation is going up.”

This warning causes DeVere Group chief Nigel Green to worry about the possibility of a global recession.

“Developed economies are having to accept that they are facing the increasing likelihood of a recession in 2022 because of these ongoing supply chain disruptions and red-hot inflation not seen since the 1970s,” he said.

“In addition, developing countries can be expected to be hit hard by the fallout of higher energy and food prices, combined with tighter financial conditions triggered by advanced countries raising interest rates in a bid to control inflation.”

The trouble is, inflation was already running hot from supply issues and post-pandemic economic recovery, even before Vladimir Putin’s troops marched into Ukraine.

And now the invasion is just fanning the flames.

So, what do ASX shares investors do with their portfolios now?

How to protect your investments against a global recession

Geopolitical events often have investors fleeing to ‘safe haven’ assets like gold or cash.

But, according to Green, we’re still in a zero-interest era, so running to those assets while inflation is high doesn’t make sense.

“Cash is often considered a ‘safe haven’ during periods of volatility but it’s going to be negatively impacted by soaring inflation,” he said.

“Rampant inflation means excess cash in your bank accounts will lead to losses in real value. Hardly a safe haven then for those wanting to build long-term wealth.”

For Green, there is only one “clear” strategy for ASX shares investors during these incredibly uncertain times: diversification.

“An unwelcome combination of supply-side issues, soaring prices, climbing business and consumer uncertainty, slower growth and employment mean global recession risks are rising,” he said.

“A considered mix of asset classes, sectors, regions, and currencies offers protection from market shocks.”

He urged investors to seek professional help to guide them through any international economic disturbance.

“Investors would do well to review their portfolios now to ensure they are best-positioned.”

The post A global recession could be coming. Here’s what to do with your ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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