Among the concerns investors have is whether a global recession will hit in 2023. If it's too early for the jury to return with a verdict on whether Australia can avoid a so-called technical recession, the RBA expects a marked deceleration in growth next year.

Mike Coop, the chief investment officer for Investment Management for Europe, the Middle-East & Africa, also believes that "as investors, the fact remains that a recession seems the most likely path for many countries". But there’s no way to know both the degree and duration of any recession that might come along.

What should I do now?

The reality is, every investor will experience numerous recessions throughout their lives, Coop says. That is the key, how we talk about them. Here, he provides three tips for investors to navigate a recession.

1. Review your goals and objectives

It’s crucial to ensure your goals and objectives are still relevant, says Coop. “With the way we’ve changed the last couple of years, it’s to be expected that those goals changed. That includes locking in when they will achieve them," he says. “No matter how it all nets out, there are huge benefits to defining success in terms of progress toward your goals, not outperforming the market.”

2. Continue to ride out the storm with a solidly diversified portfolio

Coop advises it’s best to play it safe whenever there’s a shadow of doubt. “Make sure you are taking the right amount of risk to get where you want to go, something you can live with in the down periods and that will be enough to outpace inflation, at the least.”

This can be done simply by ensuring your portfolio is diversified containing elements that behave differently to each other when recession hits including both equities and high-quality bonds, he says.

3. You bet the odds through valuation

Coops says it's "preferable to favour assets that already incorporate a low outlook for the future" as they are at less risk of declining than assets that are currently very popular, have risen a great deal and are priced for the best possible outcome which is unlikely to happen. “Within equities, striking the right balance of exposure to the most attractively valued assets alongside stabilisers, like companies with strong market positions, little debt and goods and services that are always in demand, is crucial. These hints are often visible in such places as healthcare, utilities and consumer staples.”

Investing in a recession

The question of whether there will be a recession, and how to prevent one, is missing the point, says Coop. During uncertain times, Coop says it's good to refocus on the realities of investing during a recession, which include some of the following, according to him:

• To earn investment returns, you need to take risk. Cash is unlikely to enable you to beat inflation and create wealth over time.
• Recessions are frequent (occurring every seven to 10 years, on average), short-term (lasting a few years) and inevitably return to economic growth.
• The stock market tends to front-run the economy, not the other way around. They’ll also front-run the economy before the recovery arrives. This makes market speculation extremely tough, since you need to get not one but two decisions correct (exit point and return point), in the midst of increased uncertainty. Scarcely any have this gift.
• Stocks do not have a great record of fending off a recession or of outperforming in the late innings of an economic expansion because companies see their profits decline and they default in greater numbers. But they have never failed to earn back lost ground in the years that came after.
• Bonds are well positioned because inflation and interest rates typically decline. Today, rates and yields are still high enough to provide that offset with bonds.
• The #1 way you fail to achieve your financial goals is through a permanent loss of capital you never recover. These can happen during recessions (like a lower-quality investment that goes bankrupt), so caution is in order.
• Purchasing shares when they are cheap usually results in larger-than average returns since markets already have the bad scenarios built in and there is upside if things get better.