It is advisable to take measures to protect our savings in economic crises. In addition, while we are better informed, we can make better financial decisions, especially in situations of more significant uncertainty.
For this reason, in this article, we will explain alternatives to protect our savings, both non-invested and invested and recommendations to keep up to date with the essential news in the financial world.
First, what is happening in the world with the economy?
In the United States, inflation reached its highest point in 40 years at 9.1% per year. Consequently, the Federal Reserve (Fed) continues to raise interest rates, generating a contraction in consumption and, in turn, a fall in all financial markets.
Why does this happen? Investors fear inflation will continue to rise and the Fed will raise interest rates more aggressively, sending US stocks lower. An example is the S&P 500 stock index, one of the most important in the United States, which has maintained a downward trend of 15% since January.
The world stock markets continued the trend with which they came, and the commodities began to fall due to the expected economic recession. As a consequence, it may happen that if world production falls, then things are less essential.
In turn, the war in Ukraine is strongly impacting the European economy, rapidly devaluing the euro. The currency fell to its lowest levels until reaching parity with the dollar (a situation not seen since 2002), where 1 EUR is equivalent to 1,022 USD.
In Argentina, there is also record inflation since convertibility, at 60.7% per year. What also reached a historical level was the price of the blue dollar, rising to almost 350 pesos, when the market did not welcome the change at the head of the country’s Ministry of Economy. Although today the free dollar seems to drop to a value closer to 280 pesos, the volatility of the exchange value is high.
In Mexico, the Central Bank continues to take measures to slow down inflation. Although it would be located at 7.65% per year, they are still far from their goal of lowering it to 3%. In turn, the Bank of Mexico began to raise interest rates (at the speed of the Federal Reserve) and began to generate an increase in the unemployment rate to 3.4%.
Since we are informed of the current context, let’s move forward with the actions we can take.
What to do with our uninvested savings
For the savings that we don’t have invested yet and are in our emergency fund, we have two options:
Keep them liquid in a strong currency like the dollar or the euro. In addition, we can take advantage of the fact that today the euro has a lower historical parity with the dollar. In other words, with our dollars today, we can have 12% more euros than at the beginning of the year:
- USD 1,000 in January was equivalent to EUR 892
- USD 1,000 now we can have EUR 1,000.
The second option would be to place those savings in Common Investment Funds (FCI), also called “money market”. These immediately available funds generate returns daily, allowing us to have our money instantly when needed.
And, with the savings invested, what do we do?
In times of economic crisis, fixed income is usually much safer than equities, especially if we turn to US Treasury bonds or corporate bonds.
Likewise, we can resort to alternatives that have shown exemplary performance in complex contexts, such as:
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Buy precious metals (such as gold and silver)
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Having shares of anti-cyclical companies (such as health companies, mass consumption, essential services…)
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Buy real estate if we have the possibility.
We are much more prepared for uncertain contexts now that we know what is happening with the current economic context and what actions we can take to protect our savings. And the idea would be to feel like this always. The information gives us the calm and security necessary to protect our savings.
