Major US banks set aside $4 billion for default of loans due to a possible a recession. Goldman Sacks to lay off 3,200 employees to cut cost. 60% of US CEOs predict a short recession per Conference Board survey. Just today, Goldman Sacks reported 69% drop in profit in last quarter due to decline in dealmaking revenue investment banking division and loan loss.
So many bad news. Naturally, some would ask what I need to do for my personal finance. One thing for sure is to try our best to have sufficient emergency fund just in case of loss of employment or income. Anything in rainy day fund is better than nothing. How much is sufficient? 1 month all the way to 12 month living expenses? It depends on how long it takes us to find a job. It can probably be a bit longer than usual given the economy situation, so give a bit buffer if we can. It might be wise to be more conservative or careful in this economic situation.
It might not a good idea to make sudden and drastic change to one’s investment portfolio because no one can tell for sure when recession will happen and how severe it will be and how long it will last. It is better to stick to the investment plan in terms of strategy, portfolio mix and etc. that was already laid out. However, one thing for sure is to diversify. Only a diversified portfolio can withstand economic downturn and even benefit from it.
I have been adding government long bond to my portfolio because government bond is likely to appreciate when people seek safety during recession. If recession indeed happens, I plan to buy some banks ETF whose price is still not low enough now.