Sadiq Adatia, chief investment officer at BMO Global Asset Management, joins BNN Bloomberg to talk about nervousness in the markets, and investor positioning amid volatility.

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As the world grapples with the economic consequences of COVID-19, many experts predict that a global recession is imminent. In such times of uncertainty, it’s essential to pick investments that offer the best downside protection. This means looking for sectors with stable earnings, strong balance sheets, and sustainable business models.

Sadiq Adatia, Chief Investment Officer of Sun Life Global Investments, recommends investing in areas that can weather a recession. He believes that the best investments are those that have a low correlation with the broader market, such as utility companies, consumer staples, and healthcare.

Utility companies are a safe bet as they provide essential services. People will always need electricity, water, and gas, even during a recession. These companies have stable earnings, predictable cash flows, and strong balance sheets. Moreover, many of them have a regulatory framework that guarantees income, which makes them less susceptible to economic downturns.

Consumer staples are also a great investment option in times of economic uncertainty. People will always need to buy food, beverages, and household items, regardless of the state of the economy. These companies have stable earnings, strong brand recognition, and pricing power, which enables them to hold their ground even in tough times.

Healthcare is another recession-proof sector. People will always need healthcare services, regardless of the economy’s state. Moreover, healthcare companies often have robust pipelines of innovative drugs and medical technologies that provide long-term growth potential.

Adatia warns against investing in sectors that are vulnerable during economic downturns. For example, industries such as tourism, retail, and hospitality tend to suffer the most during a recession. Companies in these sectors are more likely to carry high levels of debt and have lower earnings visibility, which makes them more susceptible to market volatility.

In conclusion, investing in areas with the best downside protection is crucial during a recession. Diversifying your portfolio with low correlation assets such as utility companies, consumer staples, and healthcare can help you weather the storm. Be wary of investing in sectors that are vulnerable during economic downturns, and remember to conduct thorough research before making any investment decisions.