The International Monetary Fund (IMF) delivered a dismal report Tuesday that basically said to get a survival strategy ready now because Recession 2013 is on its way.
In its latest "World Economic Outlook " presented in Tokyo, a kick-off to the IMF World Bank 2012 Annual Meeting, the agency cuts its forecast for overall global growth to 3.3% for the remainder of this year. It said growth in 2013 would remain lethargic at 3.6%. These estimates were down from July's forecast of 3.5% and 3.9%, respectively.
The IMF presently sees"alarmingly high" risks of a steeper slowdown, with bleak one-in-six odds that growth will dip below 2%.
"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component. The answer depends on whether European and U.S. policy makers deal proactively with their major short term economic challenges,' the report said.
Growth for emerging and developing regions was slashed from 6.2% to 5.3%. Markets in once stalwart regions like China, Brazil, India and Russia are all forecast to see waning growth.
World trade volume is projected to sink to 3.2% this year from last year's 5.8% and 2010's 12.6%.
IMF Chief Economist Oliver Blanchard said, "Low growth and uncertainty in advanced economies are affecting emerging market and developing economies through both trade and financial channels, adding to homegrown weakness."
IMF: Time for Recession Prevention
The report, Blanchard told Bloomberg News, is a "call to action" for economies around the globe.
The IMF report stressed the pressing need for U.S. lawmakers to come to some kind of compromise so the feared fiscal cliff does not come to fruition.
The planned automatic tax increases and across-the-board steep spending cuts, set to kick-in on Jan. 2 if Congress fails to act, would be an economic-nail-in-the-coffin that would usher in Recession 2013.
Europeans must also follow through on prior commitments for a more integrated monetary union and move quickly to clean up the region's sovereign debt mess.
Additionally, the IMF said a handful of emerging markets are in a position to cut interest rates, or at least hold off on any tightening, to avert fiscal risks to their economies.
So What Should Investors Do Now?
Getting economies in order will not happen overnight. Investors should take action now by recession-proofing portfolios with the following moves:
- Add Gold and Silver
A good place to start is buying inflation-hedges gold and silver. The recent upward trend in both precious metals, spurred by increased central bank buying and the lingering threat of worldwide growth slowdowns, is further evidence of the two precious metals' value.
"Gold provides a hedge against inflationary pressures that are virtually certain to emanate from the massive amounts of money that the federal bailout and stimulus plans are injecting into the U.S. economy," said Money Morning's Martin Hutchinson. "Gold and gold-based investments-such as gold mining companies-are an important part of a permanent-wealth-investment strategy because of gold's historic function as a store of value that is impervious to inflation."
Over the last several years silver's worth has been elevated to similar regard, and is currently favored by scores of investors and analysts because of its lower price and greater upside potential.
- Dive into Dividends
Dividends should have a prominent place in any portfolio. In addition to providing income stability, dividend-paying stocks also hold the added bonus of capital appreciation.
"In reality, as an investor, a dividend strategy is the first thing you should be considering," said Hutchinson. "When individual investors look at dividend stocks, they tend to focus on the current yield, and perhaps even the payout ratio, which, as you know, is a way of determining whether a company can maintain its current dividend payout."
Editors Note: For six of Hutchinson’s favorite dividend stocks, [ppopup id="70925"]click here[/ppopup].
While those factors are unquestionably important, they are only part of the story.
"If you can find a company that has a track record of dependability-of consistently raising its divided-and can be expected to continue to raise its dividend, you've bought yourself a ticket on the High Profit/Low Risk Express," said Hutchinson.
Should Congress and European finance ministers get their acts together and avoid regional recessions, all the better.
But until then, to read more about Martin Hutchinson's income strategy to survive the economic turmoil we're headed for in 2013, click here.
Related Articles and News:
- Money Morning:
Stock Market Today: Jobs Are Good, But This Stock is Better
- Money Morning:
The Double Your Money Secret I Learned Over A Few Crab Cakes
- Money Morning:
As Key Markets Stumble, Gold and Dividend Stocks May Keep Investors on Course
- International Monetary Fund:
IMF Sees Heightened Risks Sapping Slower Global Recovery
- The Wall Street Journal:
IMF Says Global Recession Risk Grows
- Bloomberg Business Week:
IMF Sees "Alarmingly High" Risk of Deeper Global Slump