How to invest for a recession

If you've been reading my weekly and monthly newsletters you will be aware that recession fears have risen sharply in the last month. Investment markets have reacted accordingly, with bond yields falling alongside commodity prices. We've also seen some rotation within equity markets, where money has flowed out of company shares in certain economic sectors into others in the hope that they may fare better in a recessionary environment.

It raises the question of how should you invest for an impending recession?

The first and most obvious asset class that should in theory benefit from the market pricing in a recession is bonds. If economies around the globe begin to contract, central banks will cease their monetary tightening plans and possibly begin loosening policy again. That would mean that they stop increasing interest rates and instead start to reduce them to avoid a severe recession.