What assets can save money in an economic storm

Risks squared

Recently, investors have closely followed the decisions made by financial regulators. Last week, the US Federal Reserve raised the rate by 0.75%, and the Central Bank of England – by 0.5%. The increase in rates is a response to record levels of inflation. The “cold shower” has already increased the cost of loans, especially mortgages, and reinforced the trend towards further strengthening of the dollar and pound against other base currencies. It became clear to everyone that for the Fed now the most important thing is to return inflation to target levels, even if this means pushing the economy into recession. A slowdown in the economy will reduce demand and prices for metals, oil and gas, traditional export sources of income for the Russian budget.

“So far, the change in the US rate has not affected the Russian currency and stock markets. For the stock market in the Russian Federation, the plans of the authorities to increase the tax burden on exporting companies and the likely change in dividend payments are now more important. Non-residents, who previously determined the dynamics of the Russian market, now do not have access to trading, ”Elena Belyaeva, analyst at Freedom Finance Global, explained to MK.

If monetary policy is being tightened in the West, then there is no need to talk about “tightening the screws” in our country. The Central Bank, on the contrary, lowered the key rate by 50 bp to 7.50% per annum in response to lower inflation expectations. This is bad news for depositors: average deposit rates will drop again. It is interesting that the decision of the Central Bank had practically no effect on the ruble exchange rate, which was no longer regulated by market mechanisms. Legal entities and citizens are now actively selling dollars and euros that have become toxic. The excess supply of the currency of “unfriendly” countries leads to the strengthening of the ruble, although according to all the laws of the genre, the country’s currency should weaken under sanctions.

As independent financial expert Andrey Vernikov believes, investments in stock market instruments should be treated with extreme caution now – in the event of a declaration of martial law, the stock exchange may be closed for an indefinite period. This has already happened in history. In addition, the transition of the economy to mobilization rails (if it takes place) also does not promise bright prospects for the stock market. For companies, this means an increase in taxes and a decrease in the ability to pay dividends, a drop in exports and the living standards of the population, which is negative for sales. “Given the high degree of uncertainty associated with geopolitics, now we need to think not about getting rich quick, but about how to save the accumulated. As for stocks, they are by nature a high-risk instrument, and now the risks have quadrupled,” concluded Vernikov.

Looking at inflation

When choosing an asset, investors are guided by the official inflation in its jurisdiction. So, in the Russian Federation inflation is now kept at the level of 14%. But, according to the forecasts of the Central Bank, by the end of this year it will drop to 12%. This means that in order to save money from depreciation, you need to invest in ruble-denominated assets that will bring an estimated annual return of at least 12%.

It is believed that during any crisis, the best investment option is real estate. Like, “squares” are a safe haven in which a frightened private investor can safely survive the storm. However, this time around, things are different.

“In the current conditions, investing in real estate is the worst choice: overheated prices that are falling and will continue to fall, rental rates of return (relative to the cost of the housing itself) are lower than even in deposits and OFZ,” explained an expert on the stock market “BCS World of Investments » Valery Emelyanov. – If the planning period allows you not to sell an asset for more than a year, then you can buy hard currency other than the dollar. Optimally, the euro, which fell sharply this year and will “catch up” with the “American” as rates converge. It is possible to buy shares of companies from European countries through mutual funds, but there is a risk of sanctions and blocking. In extreme cases, you can get by with euros in cash. They will be in short supply, as before, due to sanctions, and given the potential growth against the dollar and the very likely fall of the ruble itself, the euro could be one of the best investments next year. Although now, as we see, the opposite is true.

“Gold is also a good candidate for a rebound, but it is unlikely to bring more than outsider currencies like the euro and the yen. It’s not worth buying too much anyway. You can “get stuck” in low prices for months or even years,” says Yemelyanov. In his opinion, the least risky strategy is to buy bonds on IIA: the rate in Russia has slowed down with a fall, but there are no reasons for growth yet. You can fix the current yield (8-12%), plus a tax deduction from the state, and this is already 12-16% per annum.

Of the more risky, but potentially more profitable, Yemelyanov singled out the purchase of shares. Directly on the exchange, you can take top Russian chips or funds for the entire Russian market. The largest companies are now undervalued by an average of 50%, that is, they can grow by 1.5 times in a year. “Foreign securities in the full range are available mainly to qualified investors. It is better to take them directly, and not through funds, in order to avoid the risks of blocking in the future. The main focus of the investor is the USA and China. In dollars, they are not undervalued as much as Russian stocks, but in rubles they can bring comparable returns due to the expected weakening of the Russian currency,” the expert added.

According to Elena Belyaeva, the Russian stock market is held hostage by geopolitics and is hardly interesting from an investment point of view. Dollars and euros have become, in fact, toxic assets. Gold is not attractive in conditions of high inflation. Investing in foreign shares under Russian jurisdiction is too risky due to the possibility of blocking due to sanctions. Therefore, in her opinion, it makes sense to make investments within the Russian Federation in rubles or yuan. These can be time deposits in reliable banks or bonds of reliable issuers (also in rubles or yuan). Some amounts in cash dollars or euros will definitely not interfere, as in the currencies of “friendly” countries, you can consider buying investment gold coins.

“None of these options will save you from depreciation and inflation,” Belyaeva admits. – Investments in real estate in the Russian Federation are unlikely to be profitable at the current price level. Dollars are best kept in bank accounts abroad. It makes sense to buy foreign shares on brokerage accounts opened outside Russian jurisdiction, with an understanding of the risks associated with this. Investing in stocks is practically the only option that can give a return above inflation, but the risks are also high and not acceptable to everyone.

Maxim Biryukov, senior analyst at Alfa Capital, considers ruble bonds, especially corporate ones, to be one of the most interesting assets: “In addition to attractive coupon yields, these assets may increase in price as the key rate of the Bank of Russia is further reduced. To diversify assets, you can consider investing in gold.”

According to Andrey Vernikov, today it is reasonable to invest in tangible values. After the abolition of VAT on the purchase and personal income tax on sale, a good option is to buy gold bars, but you need to be patient, because you should definitely not count on an increase in the price of gold in the coming months. The growth of stock quotes will begin when the prerequisites for a new easing of monetary policy by the US Federal Reserve and European Central Banks appear. “Now any purchases are of a strategic nature. Business owners, given the strong ruble, should think about buying new equipment,” said an independent analyst.

He considers Sberbank shares to be an attractive asset, but they are suitable for long-term investors – the bank will show significant profits in 2022. Shares of Gazprom and other oil and gas companies are interesting for speculators. Now there is a reorientation of supplies from Europe to Asia, and this is a painful and long process. For example, the Power of Siberia-2 gas pipeline to China will be built only in 2029. “In order to keep the budget deficit in the region of 2%, the authorities will increase the tax burden, primarily for oil and gas companies,” Vernikov believes. According to him, private investors should also pay attention to the yuan. Now three large Russian companies (RUSAL, Polyus and Metalloinvest) have issued bonds in yuan. These are a good option to dilute investments in stocks and gold.

Wider circle

“There is no universal solution suitable for all investors,” said Maxim Biryukov. – The choice depends on the opportunities for additional investment, the likelihood that the money will be needed before the expected completion of the investment horizon. And, of course, from the investor’s attitude to risk. In a situation of high uncertainty, it is better to give preference to low-risk assets: bonds, gold, real estate.”

Elena Belyaeva advises not to forget about portfolio diversification, in order to reduce risks, it is better to invest free funds in different types of assets.

“But the wider the set of assets, the lower the risk, but also the lower the potential return,” reminds Valery Yemelyanov. — For an investor who wants to beat not only ruble, but also dollar (or euro) inflation, the task becomes much more complicated. For a period of 1-3 years, a 50/50 split between stocks (equity funds) and bonds (bond funds) is suitable. If you take shares directly, then it is enough to take 1-2 top shares from three key sectors (banks, oil and gas, metallurgy). In rubles, you can count on a double-digit yield, which is highly likely to outperform both future inflation and the price growth that has already taken place this year. In the currency, the choice of bonds is limited, and, in fact, as long as they are not needed for the portfolio: rates are rising, prices of debt securities are falling. You can take up to 10% of the already mentioned gold, counting on a rebound, invest about 40% in shares of the largest US companies, you can dilute them with Chinese shares (up to 10%), buy bonds in yuan (also up to 10%), and save the rest for now. account or in cash (in dollars or, alternatively, in euros – waiting for a reversal on it).

Savings accounts are very convenient for less wealthy citizens. The average rates for them are usually higher than deposits, money can be withdrawn without loss at any time. True, favorable conditions are often valid for no more than three months.

And most importantly – do not give in to emotions, avoid impulsive transactions. Money loves silence and sober calculation. It’s no secret that the biggest fortunes in the stock market are made during periods of recession. As Nathan Rothschild used to say, “Buy assets when blood is flowing and sell when the bells toll.”