BUILDING DEFENCE

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The risk of recession has increased significantly in the near-term with the coronavirus-related shock; and amid heightened market volatility, investors have been looking for ways to build defence in their portfolios. Below, we break down two scenarios for economic shock:

  1. Growth slowdown: A slowdown in the rate of economic growth
  2. Stagflation: A period of high inflation, high unemployment and a slow or negative rate of growth in the economy

Expand the sections below to find out which asset classes may outperform and which may underperform in the growth slowdown and stagflation scenarios.

A growth slowdown: A slowdown in the rate of economic growth

Equities
Fixed income
Commodities & alternatives
  • Outperform:

    • Quality: companies with strong balance sheets and profit levels, and low amounts of debt
    • Gold
    • Defensives: companies that might be less prone to slowing demand, such as utilities providers, which provide a product that will remain in demand regardless of the state of the economy
    • Safe-haven single countries (e.g. Switzerland, Japan)
    • Property
    • Minimum volatility: companies whose share price might not be as volatile as others, based on historical data
  • Underperform:

    • Cyclicals: companies that tend to do well when the economy is growing, but suffer when the economy slows
    • Emerging market equities
  • Outperform:

    • Ultrashort and short duration: Bonds that will soon mature and therefore would be less exposed to future uncertainty
    • Inflations linkers/floating rate notes: Bonds with coupon payments that rise in line with inflation
  • Underperform:

    • Duration: Bonds that still have a long time until they mature and are therefore more exposed to future uncertainty
    • Spreads: Bonds issued by companies, which could be at risk of being unable to services bond payments and other debts
  • Outperform:

    Gold

  • Underperform:

    Oil

Stagflation: A period of high inflation, high unemployment and a slow or negative rate of growth in the economy

Equities
Fixed income
Commodities & alternatives
  • Outperform:

    • Defensives: Companies that might be less prone to slowing demand, such as utilities providers, which provide a product that will remain in demand regardless of the state of the economy
    • Dividend growers: Companies that are able to continue growing the amount they pay in dividends to each shareholder
    • Minimum volatility: Companies whose share price might not be as volatile as others, based on historical data
    • Safe-haven single countries (Switzerland, Japan)
  • Underperform:

    • Cyclicals: Companies that tend to do well when the economy is growing, but suffer when the economy slows
    • Value
    • Momentum
  • Outperform:

    • Inflations linkers: bonds with coupon payments that rise in line with inflation
    • Government bonds: bonds issued by governments, which may be unlikely to default on their debt obligations
  • Underperform:

    • Spreads: bonds issused by companies, which could be at risk of being unable to services bond payments and other debts
    • Short duration: Bonds that will soon mature and therefore would be less exposed to future uncertainty
  • Outperform:

    Gold

  • Underperform:

    Metals, Oil, Physical infrastructure

  • WHAT IS AN ETF?

    An ETF (exchange traded fund) is a pooled investment fund like a unit trust or mutual fund, but with the key difference that it can be bought and sold on a stock exchange in the same way as a share in a company.
    Read full article Read full article
  • SUSTAINABLE PORTFOLIOS START WITH INDEXING

    Looking to build a more sustainable portfolio? Discover the 5 reasons why you should use iShares ETFs and index funds to invest sustainably.
    Read full article Read full article
  • EMERGING MARKET EQUITIES

    iShares offers a range of emerging market (EM) equity ETFs for the core of your portfolio, across all market caps. Learn about our cost-efficient solutions.
    Read full article Read full article
  • THEMATIC INVESTING WITH BLACKROCK AND ISHARES

    What is thematic investing and how is it related to megatrends? | Why invest thematically in potential future drivers of return?
    Read full article Read full article
  • COMMODITIES

    iShares offers a range of commodities funds to help diversify the core of your portfolio. Learn about our accessible and cost-efficient solutions.
    Read full article Read full article
  • BUILDING DEFENCE

    Defensive investing can be important to mitigate the risks associated with volatility and bear markets. Learn how to add resilience to your portfolio.
    Read full article Read full article
  • Megatrends & thematic investing

    What are megatrends? What is thematic investing? See how our five megatrends connect to investment themes and funds
    Read full article Read full article
  • iSHARES CORE FUNDS

    iShares offers a broad range of ETFs, across asset classes, regions and strategies to help you build a strong core for your portfolio. Explore our core funds.
    Read full article Read full article
  • THE POWER OF COMPOUNDING: LITTLE AND OFTEN FOR A LONG TIME

    By drip-feeding smaller amounts of money into your investments over time, & leaving them there to grow, your return may well be higher over the long term.
    Read full article Read full article
  • WHICH COUNTRIES HAVE THE MOST SUSTAINABLE ENERGY POLICIES?

    Sustainable energy policies are a goal for most countries, but which ones have made the most progress so far?
    Read full article Read full article
  • Investing in the future with megatrends

    What are megatrends and how do they affect our investment thinking?
    Read full article Read full article
  • HOW TO INVEST IN MEGATRENDS

    How could you invest in megatrends and access BlackRock active funds and iShares ETFs? Use our tool to see which funds are exposed to BlackRock megatrends
    Read full article Read full article
  • WHAT IS AN INVESTOR?

    If you ask a person to describe a typical investor, they might suggest someone in a suit, but investors increasingly do not fit such stereotypes.
    Read full article Read full article
  • ETFs VS INDEX MUTUAL FUNDS

    Exchange traded funds are often compared to index mutual funds, with which they share some key similarities: delivering index returns; providing exposure; diversification and trading frequency.
    Read full article Read full article
  • SUSTAINABLE, SIMPLIFIED.

    iShares by BlackRock, the largest provider of exchange-traded-funds (ETFs) in the world, provides exposure to various asset classes. Discover how.
    Read full article Read full article
  • iShares ETF and Index Investments List | iShares BlackRock

    iShares provides a wide range of low fee exchange-traded funds (ETFs) in various asset classes. Learn how you can keep more of what you earn.
    Read full article Read full article
  • THE CHINA OPPORTUNITY

    Explore ways to access the world’s second largest economy as it continues to open up for the investors. Know the China story and its linked opportunities.
    Read full article Read full article
  • JAPANESE EQUITIES

    iShares offers a wide range of Japanese equity ETFs for the core of your portfolio. Learn more about our easy-to-access, liquid investment solutions.
    Read full article Read full article
  • MEGATRENDS: TECHNOLOGICAL BREAKTHROUGH

    Technological breakthrough – technology advancements – emerging technology. What is the impact of this megatrend? And what are the potential implications for the future?
    Read full article Read full article
  • INVESTING IN THE FUTURE WITH MEGATRENDS

    What are megatrends and how do they affect our investment thinking?
    Read full article Read full article
  • MAKE YOUR MONEY WORK FOR THE FUTURE

    You never know when you might need cash. But keeping it under your mattress or in a savings account can lose you money over the longer term.
    Read full article Read full article
  • VISUALISING THE EXPANSE OF THE ETF UNIVERSE

    While the sheer scale of the ETF universe is captivating, it’s the variety that shows you how ubiquitous the instrument has become.
    Read full article Read full article
  • EAT MANY COLOURS. A BALANCED INVESTMENT DIET

    Diversifying between stocks, bonds, asset classes, sectors & countries is important. It can protect you if one stock dips or a general market downturn.
    Read full article Read full article
  • iSHARES ETFs EXPLAINED

    Learn more about ETFs and how the iShares Core series can help you.
    Read full article Read full article
  • ABOUT iSHARES

    iShares ETFs are globally traded funds that help clients build the core of their portfolios. Read more about iShares here.
    Read full article Read full article
  • MEGATRENDS: DEMOGRAPHICS AND SOCIAL CHANGE

    Demographics and social change – ageing population, shifting power. What is the impact of this megatrend? And what are the potential implications for the future?
    Read full article Read full article
  • INVESTING IN GOVERNMENT BONDS

    iShares offers the widest range of government bond ETFs for the core of your portfolio of any provider in Europe. Learn about our bond solutions.
    Read full article Read full article
  • EUROPEAN EQUITIES

    iShares offers a wide range of European equity ETFs for the core of your portfolio. Learn about our various broad market and single country solutions.
    Read full article Read full article
  • China – an opportunity too big to ignore?

    Much is changing in China and this has material implications for all investors. The cost of ignoring this emerging opportunity might prove too high.
    Read full article Read full article
  • SUSTAINABLE, SIMPLIFIED.

    At iShares we believe you deserve clarity, and that’s why we designed our sustainable ETF and index fund range to help you invest with confidence.
    Read full article Read full article
  • COMPARE FUNDS

    Compare up to 4 iShares funds with our side-by-side view of performance, asset allocations and much more to determine which fund is right for you.
    Read full article Read full article
  • GET TO KNOW INVESTING

    We monitor our physical wellbeing with apps, but how do we look after our financial health? In this series discover how to become wise about wealth
    Read full article Read full article
  • GLOBAL EQUITIES

    iShares offers a broad range of world equity ETFs for the core of your portfolio, giving access to global stocks. Explore our large, liquid solutions.
    Read full article Read full article
  • FIXED INCOME

    Introduction to bonds and fixed income. Read our guide to understand fixed income universe and why some investors choose to index their bonds.
    Read full article Read full article
  • MEGATRENDS: RAPID URBANISATION

    Urbanisation – the rise of the megacity – mass migration underway. What is the impact of this megatrend? And what are the potential implications for the future?
    Read full article Read full article
  • TERMS AND CONDITIONS

    BlackRock is the world's largest asset manager. To browse our website, please ensure you read our latest terms and conditions here.
    Read full article Read full article
  • MEGATRENDS: CLIMATE CHANGE AND RESOURCE SCARCITY

    Climate change and resource scarcity – temperature rising; spending on green infrastructure. what is the impact of this megatrend? And what are the potential implications for the future?
    Read full article Read full article
  • VISUALISING THE RISE OF SUSTAINABLE INVESTING

    With a wide range of global sustainability challenges and complex risks on the rise, investors are starting to re-evaluate traditional portfolio approaches. Learn more >
    Read full article Read full article
  • Our investment strategists

    Get the latest market and investment insights from our team of experts. Click to read our experts work profile and experience.
    Read full article Read full article
  • INVESTING IN CORPORATE BONDS

    iShares offers the widest range of corporate bond ETFs for the core of your portfolio of any provider in Europe. Learn more about our bond solutions.
    Read full article Read full article
  • NAVIGATE OUR RANGE

    There are many different ways to get started with sustainable investing and ESG. Explore the iShares range of sustainable index solutions for the core of your portfolio.
    Read full article Read full article
  • MARKET & INDEX INSIGHTS

    iShares' post-Brexit coverage provides analysis and considerations for investment portfolios, including sterling, shares, bonds, gold and emerging markets.
    Read full article Read full article
  • MEGATRENDS: EMERGING GLOBAL WEALTH

    Shifting economic power – power shift from west to east. What is the impact of this megatrend? And what are the potential implications for the future?
    Read full article Read full article
  • HOW TO BUY iSHARES ETFs

    How to purchase iShares ETFs
    Read full article Read full article
  • HOW CLIMATE CHANGE AND RESOURCE SCARCITY IS SHAPING THE FUTURE

    Megatrends are transformative forces that could change the global economy. See how climate change and resource scarcity could impact investing.
    Read full article Read full article
  • WHY INDEX YOUR BONDS?

    Visual guide to the Continued increase in the adoption of bond ETFs driven by growth in fund size, deepening liquidity and widening breath of exposure
    Read full article Read full article
  • IT’S A MARATHON NOT A SPRINT: THE LONG GAME OF INVESTMENT

    Going slow and steady is the golden rule. By drip-feeding smaller amounts consistently into your portfolio you could benefit than if you invested a lump sum.
    Read full article Read full article
  • INVESTING IN CHINA

    Investment in China is becoming more crucial as foreign investors often struggle accessing onshore markets. Know about this growing economy with BlackRock.
    Read full article Read full article
  • MEGATRENDS: DEMOGRAPHICS AND SOCIAL CHANGE

    Demographics and social change – ageing population, shifting power. What is the impact of this megatrend? And what are the potential implications for the future?
    Read full article Read full article
  • MEGATRENDS & THEMATIC INVESTING

    What are megatrends? What is thematic investing? See how our five megatrends connect to investment themes and funds
    Read full article Read full article

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy.