What To Buy / Sell - Oil/Bank - If US Slips Into Recession ?

JC888
2023-04-05

US market Volatility Index for past 5 trading days

US stock market rally lost ground on Tue (04 Apr).

The fear that permeated US market on Mon (03 Apr) due to a weak ISM PMI index (Feb 2023), resurfaced again. Click here to read yesterday's post on ISM PMI index !

This time though, it is the US Job Openings and Labour Turnover Surveys (JOLTs) for Feb 2023

US jobs opening fell to a 21-month low; lower than expected.

For Feb, there were 9.9 million jobs open vs 10.6 million (Jan 2023) and 11.6 million (Feb 2022).

The “good” news to be inferred is that it lowers Fed’s interest rate hike odds.

Unfortunately, it also further reinforces the probability and raise concerns that US economy is heading for a recession.

With more official data/reports are released over the coming days, weeks and months - the health status of the US economy would only become clearer and clearer.

If US Slips Into Recession, What Stocks To Load Up Now ?

(1) US Brent Oil Fund LP (BNO)

I will turn to ETF for a change. Still “Energy” sector, one of my favourites.

  • $United States Brent Oil Fund LP(BNO)$ tracks Brent crude oil prices’ performances.

  • Brent crude is a benchmark for light oil market in Europe, Africa and Middle East.

  • The oil comes from oil fields in the North Sea between Shetland slands & Norway.

(2)SPDR S&P Bank ETF (KBE)

My 2nd favourite sector is the Financial / Banking sector. I am also looking to ETF for my long term strategy.

  • ETF invests at least80%, of its total assets in the securities comprising the index.

  • The index represents the banks segment of the S&P Total Market Index (“S&P TMI”).

  • The S&P TMI is designed to track the broad US equity market.

Why I Like ETFs For A Change ?

To more than survive a recession, every cent saved means an additional cent to be invested. With that mantra in mind, below are my reasons for considering ETF.

  1. Relatively low-cost investing. Due to the way ETFs are structured, they usually have lower costs compared to investing in mutual funds. They could also be “cheaper” than buying a oil or bank stock directly.

  2. Diversified investment. By investing in a basket of oil stocks or banking stocks, the risks are spread out. Conversely, if there are gains are to be had it will also be apportionate accordingly.

  3. Traded on exchanges. I will be able to buy or sell an ETF throughout trading day on the exchanges unlike mutual funds where the transaction occurred at end of day processing.

  • Do you think the US will head into recession ?

  • Do you think its advantageous to invest in ETF during recession ?

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Modify on 2023-04-06 00:47

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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