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4 possible scenarios of the future economic development

scenarios, week 41

The pandemic has affected many economic sectors. However, on the other hand, it has opened up new opportunities for investment. What can we expect from the future development? 4 basic scenarios are possible.

Opportunities for investment have opened up, for example, in the field of online entertainment. But many people see an opportunity to invest in medical technology, for example to support the production of lung ventilators. Another great opportunity is cryptocurrency. In both the United States and Europe, many people have invested in cryptocurrencies to protect their assets against inflation.

Cryptocurrencies have shown that in times of crisis, when the centralized financial system is lagging behind, they can maintain the value of the currency and solve problems that central banks cannot achieve. Many people received stimulus packages and they invested it in cryptocurrencies.

Possible scenarios

We cannot predict whether the second wave of coronavirus will occur or not. So what are the possible scenarios?

W scenario

The “W scenario” counts on euphoria, sobering up and another slump, followed by final growth and recovery.

U scenario

Most analysts of Patria Finance are betting on a U-shaped scenario for the next period, where a slower recovery is expected.

V scenario

The most optimistic is the “V scenario”, which expects a fast recovery, by the year 2021, and Patria analysts attach the least probability to this scenario.

L scenario

The most pessimistic and not mentioned in the original article is the “L scenario”. There are some analysts, that are starting to warn against this one playing out. It means that there will be no recovery any time soon to the levels before pandemic. Instead there will be a long economic depression and it will take a long time for the global economy to start recovering.

Conclusion

Even if the pandemic subsides, the economy will never be the same as before. It is therefore necessary to set the investment plan with regard to possible unpredictable situations. Therefore, invest in instruments with a strong balance sheet. It is also necessary to diversify your portfolio in various types of assets, so when one type, like shares or bonds drops, others will hold on and the loss will not be so devastating.

However, if you are new to investing, you always need to search for information first, to set up an investment strategy and, if necessary, consult an expert or two. Also keep in mind the golden rule – never invest more than you can afford to loose.

Source: patria.cz

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