U AND V SHAPE OF RECOVERY

With the financial markets currently on a huge downtrend, it’s hard to picture what the recovery to the current economic situation will be like. Constant barrage of bad news and a total global economic shutdown, the economy is quickly entering a recession. It might be difficult for some to think optimistically during times like these, but it’s important to remember that all recessions will end at some point.When the financial markets and the economy make it through this current crisis, what will the recovery look like? Will it be U shape recovery or V shape recovery?

WHAT IS U AND V SHAPE OF RECOVERY?

A U-Shaped Recovery is a type of economic recession and recovery that resembles a U shape when charted. A U-Shaped Recovery represents the shape of the chart of certain economic measures, such as employment, GDP and industrial output. It is also charted when the economy experiences a gradual decline in these metrics followed by a gradual rise back to its previous peak.

Whereas,V-shaped recovery is a type of economic recession and recovery that resembles a "V" shape in charting. Specifically, a V-shaped recovery represents the shape of a chart of economic measures economists create when examining recessions and recoveries. A V-shaped recovery involves a sharp decline in these metrics followed by a sharp rise back to its previous peak.

PRESENT SITUATION SUPPORTS U OR V SHAPE OF RECOVERY?

It’s incredible to think about just how quickly market conditions have changed. . The speed at which the market and economic conditions have deteriorated is simply unprecedented. With this, There are experts and long-term investors holding out hope for a V-Shaped Recovery.

If the economy was able to go down so quickly, what is stopping it from going back up in a similar way? The economy showed a few signs of a recession or slowdown prior to the Coronavirus impact, but for the most part, it was strong. Since the major cause of the decline in financial markets is a health crisis, one could argue that the economy will be able to come back strong after the government gets a better grip on the issue.

On the other hand, it’s hard to believe that a V-Shaped Recovery is likely at this point simply due to the uncertainty of the entire situation. Investors are increasingly grouping into safe-haven assets and out of the stock market. Consumer spending is rapidly declining. These types of impacts make the chances of a recovery meet increasingly low at this point of time. Some believe that after the quarantine stage is over consumer spending will go back up, but it’s more complicated than that.But till then people can temper their expectations regarding a V-Shaped Recovery until we have the opportunity to learn more about the true impact of the Coronavirus on the economy.

SCHEME THAT IS SUITABLE FOR CURRENT MARKET CONDITION:

Now you can take the advantae of mutual fund by investing in the right fund

Having said that, you should always choose your mutual funds based on your goals, investment horizon, and risk profile. If you have a very long investment horizon and ability to take risk, you may consider investing in Equity mutual funds at current ssituation. Further, you should choose a mutual fund category that is in line with your risk profile. 

Say, if you have a conservative risk profile, you should opt for large cap mutual funds. If you have a moderate risk appetite, you may consider investing in multi cap mutual funds. Aggressive investors may opt for mid and small cap schemes.

Keep in mind you should  be prepared to witness a lot of volatility during your investment tenure!

You can use GIIS Financial tools or Our Android App  for Investment, tracking and Asset allocation planning. 

*Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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