Uncertainty and adversity are managed by different economies in different ways with varying results.  You can think of the economy of a country as a road and depending on the condition of the road, that is how fast vehicles can through that road.  Naturally, vehicles will not be able to run fast in a dirt road as compared to a concrete highway.  Uncertainty and adversity can come in the form of the weather conditions, signage’s or lack of it, lighting, lane markers and so on.  A road will not be as easy to drive in if it is night time, in the middle of a typhoon and when it is poorly maintained. 

Talking specifically about our country, it does not take too much uncertainty and adversity to slow down or even reverse our economic growth.  Not only do we have less than ideal roads but we sometimes have the wrong drivers using these roads.  This leaves us with no choice but to slow down and proceed with caution lest we end up in a catastrophic accident.  What are the uncertainties we are facing in 2022?  Of course we have the continuing problem with COVID, the national elections which will determine our future administration, calamities that regularly comes our way such as typhoons, earthquakes, volcanic eruptions, and the never ending problem with criminality, drugs, terrorists and secessionists.

As an example, the PSEi closed the first trading day of January 4, 2021 at 7,197.50 and ended the year on December 31, 2021 at 7,122.63, which is a decline of a little more than 1%.  If you thought getting a sub 1% return on your deposits in the bank was bad, losing money after a whole year is even worse!  It is also worthwhile noting that the PSEi all time high reached 9,078.37 on January 29, 2018.  If you have gotten in at that time and kept your investment up to the end of 2021, you would have lost more than 21.5% of your principal!

I guess this shows how fragile the Philippine economy really is particularly at this time of uncertainty and adversity.  What then can we do?  If you are fortunate enough to have investible funds, here are some options.  You can invest in foreign equities, if you put your money in the S&P 500 index, for the whole of 2021, you would have gotten a return of 26.89%!   You can focus on acquiring specific undervalued assets for a long term hold or for use in business, such as real estate properties.  You can also go into a trading mode, buying when there is a dip and selling when there is a recovery.

Sometimes, things are too difficult to call so perhaps keeping yourself liquid by just holding on to money is not such a bad thing.  What currencies to hold may be something you can consider but in reality there are only a handful of currencies you should think about.  In spite of what is being said about the US Dollar, I have a bias of holding on to US Dollars instead of Pesos.  At the start of 2021 the exchange rate was US$ 1 to Php 48.01.  At the close of 2021 it was US$1 to Php 50.99.  This means that if you had US Dollars at the start of 2021, by the end of that year you would have made 6.2% just on the exchange rate gain!

Now is not the time to act on impulse.  There is no need to rush into things and if you are patient enough you could get what you want at the price and terms you want.  Nonetheless there is still no guarantee that you were able to get in at the bottom, so if the market prices still slide you may have to either cut loss or hold.  If you believe that the asset is undervalued, just sit on it and you will eventually come out ahead. A prosperous 2022 to all of you!

 (The views and comments of the author are his own and not of the newspaper or FINEX.  Comments may be sent to [email protected])