As the S&P/ASX 200 Index (ASX: XJO) officially enters a bear market, many people are starting to talk about a 2020 recession. ASX 200 shares have been hammered lower and the benchmark index is now down more than 20% from recent highs.
But for all the talk of a downturn, the comparison to the Global Financial Crisis (GFC) in 2008 may not be a good one.
Why would a 2020 recession be different?
For one, this recession would be largely driven by supply shocks.
The disruption due to coronavirus or COVID-19 has smashed ASX 200 shares lower but it's not for a lack of demand. Global supply chains have been hit and many have realised just how big a part China plays in the global economy.
Sub-prime mortgage lending was arguably the trigger for the 2008 GFC. However, it looks as if coronavirus could be the trigger for a 2020 recession (if we see one).
But the reality is that the underlying economy may not be all that bad. The RBA Deputy Governor said yesterday that the central bank expects the Aussie economy to bounce back.
While the 2008 GFC unravelled across the world, a 2020 recession may have a different impact on ASX shares. Although certain sectors like travel and education may struggle, others may not.
Once the virus passes and China reboots, we could see a return to normality. It's possible that we enter a recession, being two quarters of consecutive negative GDP growth, and then exit out of it by mid-year.
That means that your ASX shares may not be too badly hit. One of the worst things to do in a down market is to panic sell. It's OK to sell tactically or strategically, but panic selling rarely ends well.
Which ASX shares should I buy?
If a 2020 recession is on the way, it's best to position your portfolio for a bumpy ride.
I'm personally interested in ASX Energy and Healthcare shares. People still need power and still get sick, even in a recession. I'd be looking at Origin Energy Ltd (ASX: ORG) and Ramsay Health Care Limited (ASX: RHC).
There's also the chances that recent RBA interest rate cuts could fuel house prices further. That could help boost ASX real estate shares like Domain Holdings Australia Ltd (ASX: DHG) in 2020.
