Kung Ci Fa Cai
Legend has it that the first animal in the Chinese zodiac should really have been the Ox, rather than the Rat. The rodent only made it to the head of the chasing pack by climbing onto the Ox’s back and scurrying to the front of the queue.
That doesn’t diminish in any way the Ox’s enormous accomplishment by beating the other ten zodiac characters. That is quite an achievement for an animal that is not generally known for being one of the quickest on the planet.
But what the Ox lacks in speed, it more than makes up for in determination….
And slow and steady could be something that might best describe the global economy’s recovery from COVID-19. Despite the development of vaccines, it will still take a while before countries around the world return to their pre-pandemic levels of output.
But just as the Ox made it to the finish line, the global economy will recover, too. However, it will need hard work – a lot of hard work. That could be another feature of the Year of the Ox.
We will all have to pick our way through the trail of devastation that has been left behind by the deadly pathogen. Some businesses that were shuttered may never re-open. Others that were hanging on by a thread may be forced to call it a day.
That is what is known as the economic cycle. Economies expand. Economies contract. Companies grow. Companies whither. It happens. We don’t know when it will happen but happen it will.
The economic downturn this time was caused by a virus that rapidly spread around the world. In 2008, the economic slump was caused by a banking crisis. At the turn of the Millennium, it was caused by the bursting of the dot.com bubble….
…. Three years before that, it was the Asian Financial Crisis, and a decade before that it was Black Monday.
As investors, we need to always be ready for the next economic downturn. The best way to do that is to build a robust and diversified portfolio that is strong enough to withstand the fallout. If we get it right, we should be able to cope with almost any economic conditions.
Let’s plough on together in the Year of the Ox.
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Disclosure: David Kuo does not own shares in any of the companies mentioned.