We expect a recession by end of 2022, these sectors could help hedge your portfolio: Global strategist
Amid economic uncertainty, one equity strategist recommends positioning portfolios defensively and sees IT, health care and energy sectors as areas of interest.
Scott Wren, a senior global equity strategist at Wells Fargo Investment Institute, said in an interview Tuesday that he predicts a potential recession to occur later this year and last until midway through 2023.
Wren isn’t alone in predicting a recession next year. Jean-François Perrault, a chief economist and senior vice-president at Scotiabank Economics, said early this month that he expects Canada to enter a technical recession in early 2023.
As such, Wren said retail investors are worried about the state of the economy and what that could mean for their portfolios.
“Hopefully they [investors] have taken some steps to desensitize their portfolios to the economy. For us, you want to have good quality companies that have good cash flow, [good] products [and] great balance sheets. They’re buying back shares, things like that,” said Wren.
Wren said there are ways for investors to hedge recessionary risks and ideally they started to position their portfolios defensively as of March or April of this year.
“You want to have some money in things like health care. We've [also] upgraded utilities [and] staples. We've underweighted things like consumer discretionary, industrials, things like that [which] are very sensitive to the economy,” he said.
Wren said he has also reallocated funds from equities into short-term fixed income.
You can watch the interview with Wren at the top of this article.