As the global market experiences steep interest rate hikes, it’s now more troubling for investors to climb to the summit.
The US Federal Reserve hiked the interest rate by 0.75%, the most aggressive rise in the market in almost 30 years. ASX stock market witnessed a roadblock wherein the average Australian’s portfolios collapsed and the country’s wealth-listers lost around $12 billion in a short span of time. Investors are now worried that a recession will be triggered in 2023.
In Australia, the Reserve Bank governor has already warned about the possible interest rate surge that could go as high as 7%. If this continues, we are bound to experience further reductions in share price values.
Whilst inflation is worse in other markets, analysts have agreed that it’s only a matter of time before it will impact ASX. But there’s always a way to outsmart a market downturn. Here are the top sectors that can protect your portfolio from sliding down.
Food and Agricultural Sector
The Australian Government forecasted that the agricultural production will be at $80.4 billion, the second-highest on record. This is supported by the sector’s current strength brought by the high demand for soft commodities. The war in Ukraine and trade restrictions played a critical role in the grain price increase. Food prices will not ease until 2023. In fact, the World Bank has noted that food prices surged by 78% compared to their average between 2015 and 2019.
Investments in the Food and Agricultural sector have always been considered conservative and long-term which offer stable returns.
Due to the high demand for new housing, the industrial sector can take advantage of the market behaviour. These industries include manufacturers of building products, trucks and electrical equipment.
The sector remains to be a sound investment with 6,390.100 points in March 2022; an increase from its previous number of 6,146.100 points for February 2022. As Australia expects 180,000 immigrants by 2023, so is the need for further real estate developments. In fact, we are optimistic that the real estate industry will generate annual earnings of 34% over the next five years.
There’s no denying that Australians prioritise health and wellness. In fact, the country’s healthcare system ranks highly worldwide. And with government data suggesting a longer lifespan by 2055 (96.6 years for women and 95.1 for men), the healthcare industry will remain strong.
Following a minor slowdown in growth in 2020, the health and wellness economy has bounced back and has a projected 9.9% average annual growth. The market is expected to reach nearly $7.0 trillion in 2025, and to date, Australia ranks 10th in the world in terms of spending in the health and wellness industry.
Whilst the pandemic still challenges the healthcare sector, it will remain resilient against harsh headwinds. The new technology in the industry opens up opportunities for investors, making it an excellent sector amidst interest rate hikes.
Your choice of investments is also anchored on your long-term strategy. If you wish to take advantage of the environment, choose the stocks from the above sectors. On the other hand, you can be in a defensive position during an interest rate hike and invest in safer options like gold.