Headwinds That Could Become Tailwinds

Emerging markets may yet see a strong rebound next year.

- Leon Kok

Many friends, colleagues and associates I meet these days seem to have been completely paralysed by the present situation. Their biggest fear is that the world financial system is headed for collapse. This is underpinned, for instance, by various research outfits beckoning that, while the first Covid-19 wave has wreaked havoc, a second one could be far worse.

The huge slump that could follow, they argue, could take a huge bite out of your nest egg. They propose that you ought to start financial distancing at the very soonest to protect your money. The worst-case scenario could be a sink-or-swim situation over the next few years.

These contentions are often compounded by successive news broadcasts, each more disturbing than the last.

But what’s new? We’ve been through this before, notably the collapse of the Soviet Union in the late 1980s, the bombing of New York’s World Trade Centre in 1993, the 1998 Asian financial crisis, the rising threat of radical Islam, the 2008 financial collapse, and Greece and Italy’s singular crises more recently.

The extreme projections may or may not materialise, but there is also a case to be objective and prudent in your approach.

Ideally, one needs to be invested across the planet (not being dependent on one particular geography); be exposed to companies that provide day-to-day necessities, such as Unilever, Johnson & Johnson and Nestlé; have sound long-term performance records; and can bank on dividend yields in the region of, say, 3%.