The next economic depression may come, how to allocate your assets?

The trade war has hurt the world economy, and the pandemic of infectious diseases has caused global economic activity to halt. The performance of international trade has dried up, and the degree of decline has made investors feel as if they have returned to 1930 and 2008.

The unrest of the Great Depression and the financial turmoil risks hit people from all walks of life. Investors are not confident any more. What should we do next?

The economic downturn, the stock market bears the brunt

Stock market crash in 1930, a 30-year economic recovery

On October 29, 1929, the U.S. stock market suddenly plunged, which kicked off the 1930 Great Depression. Since then, the U.S. stock market has fallen all the way, from a peak of 5636 points in 1929, to a drop of 807 points in three years, with a downward range of 85.7%. The Dow Jones Index is less than 1/5 of the highest point. This downturn also spread from the United States to the world. It was not until 1958 that the Dow Jones Index returned to more than 5000 points. This wave of economic recovery has gone for 30 years.

The 2008 financial tsunami, the stock market was affected

In 2008, the financial tsunami kicked off by the bankruptcy of Lehman Brothers. As the world's largest economy, the US stock market was affected. Dow Jones stock market fell from 17092 points to 8532 points in two years, a drop of 50%, and the stock value was only left. Half at the highest point.

                                                             US Dow Jones Index(source：macrotrend)

Facing the financial crisis, bond yields are stable, but there are still risks

The yield of government bonds reflects investors' expectations of the economic environment. When the environment is good, the yield will rise. On the contrary, when the market risk is high, a large amount of money will flow in, and the yield will fall. Whether during the Great Depression or the 2008 financial tsunami, the yield on public debt rose 1-2 yards instantaneously, reflecting that investors were not optimistic about the market at the time, and funds from other commodities all flowed to public debt, which contributed to a decline in yield. After that, yields began to fall all the way. Unstable yields during the financial crisis are an unpredictable risk for investors.

           1925-1940 U.S. 10-year Treasury bond yield (Data source: European Central Bank)

           2006-2016 U.S. 10-Year Treasury Bond Yield (Source: European Central Bank)

Fixed income high-profit insurance, a weapon against financial crises

At present, under the circumstances of the epidemic locking up the country and the economic stagnation, the stock market has performed bleakly, and many institutional legal persons have sold shares in large numbers. The unstable yield of the bond market also makes it scarce. Under this wave of shock, fixed income products will be an excellent target for hedging.

In general, the insurance interest rate is much better than that of banks. In addition, short-, medium-, and long-term products are available. Investors can adjust their asset allocation needs, which is a good capital preservation product in the market turmoil.

Insurance in the market is divided into fixed-rate insurance policies and variable-rate insurance policies. The variable-rate insurance policies may obtain a better declared interest rate when the market conditions are good. More value preservation in fixed rate insurance under bleak financial environment.

The world is looking forward to restarting the economy and restoring international trade after the pandemic is under control, but it is still unknown how long will stock and bond markets return to normal. The only thing that is certain is that a fixed-income high-profit policy will allow you to maintain a fixed profit in the future.