Debt crisis, austerity moves, bail outs, political leadership changes, markets on a pogo stick – these are the “new normal” in a “new economy.”

As I find update myself with the world economic events, it makes me think I am in some bizarre new world order. Time was we only concentrate on the economic impact of the warring Middle East but it seems that the four corners of the globe have been sucked up by some economic tornado. In the western hemisphere, the U.S. in a lopsided battle against a sluggish economy still reeling from the devastating effects of the sub-prime crisis.

It appears that the astonishing amount of bailouts has not done much for the world’s largest economy and there has been political pressure on the Obama government. The Wall Street protests are an indication of the sentiment of many Americans and their nation is polarized.

Macroeconomic indices has not been rosy for the American front either – lackluster economic growth plus high unemployment rate is a recipe for economic disaster. On the European front, Portugal, Italy, Ireland, Greece, and Spain with their debt scares continues to give a lot of people sleepless nights (most of them bankers). Changes in political leadership in Greece and Italy might turn the tides to their favor but that remains to be seen.

Watching the developments in that region is akin to watching our “telenovelas” – lots of action, cliff hangers and more so, drama. Moving to the Far East – one the world’s largest economy, Japan, can’t seem to wake up from economic slumber. The once mighty Japanese economic empire is slowly losing preeminence with virtually no economic growth for many years and the recent devastating earth quakes puts a heavy toll on an already burdened economy.

Pockets of economic upheavals also erupted in many areas … the ongoing strife in the Middle East keeps the price of oil up further giving inflationary upward pressure on the world. The ever precarious Israel-Palestine relationship is a time bomb waiting to explode. National disasters are erupting more frequently and cuts across the globe, leaving untold physical and economic damages. China and India are strong economies but one would be foolish to think they will not be affected by the economic slowdown of the Euro-American economy – their biggest market.

What then of the Philippines? How do we fit in this “new normal” or the “new economy”? If first world countries are in a rut, what then for a country like ours? Aren’t we also struggling with a debt issue? Aren’t we also struggling with poor economic growth?

Firstly, let me ease the reader’s concern with our debt issue. The US, Italy, France, Spain, Greece and many others have an extremely high percentage of their debt payments as against their GDP – over 90% and some close to 100%. By comparison, the Philippines debt payment to GDP ratio is only a little over 50%. While we are still at risk in the global economic skirmish, I believe the present situation also opens up a lot of opportunities for us to take advantage of. In the arena of outsourcing, we have a big talent pool of skilled Pinoys who can do the job and do it well at cheaper costs. Our heroes, the Overseas Filipino Workers are ready to take on any job at any given time and in any place. Our banking system remains to be a stable one with good check and balance measures thanks to the Central Bank and surprisingly good legislation. I believe that the whole economic situation created some vacuums and voids a nation like the Philippines can fill, own and thrive at. This is clearly an example of the many advantages of being small, if only we rid ourselves of small mind thinking. In a new economy, one can get lost and forgotten – yet one can find a place to achieve many of her aspirations and goals.

I am generally a positive thinker and not fond of gloom and doom predictions; yet if I am to be objective and if I am to read the writings on the wall, I say that man’s economy is not going anywhere north anytime soon. How do I get to sleep with all these knowledge and understanding? My answer is very simple: I chose to subscribe to God’s economy instead.  Amidst all these, my faith in my creator gives me all the hope and security I need and my personal experiences have validated that I was correct in my subscription. In His presence, I fear no recession, no inflation, no debt crisis, no unemployment – all I experience is peace.

“Trouble and distress have come upon me, but your commands give me delight.”  – Psalm 119:143, NIV.

* Also appears in Moneysense November-December 2011 issue

Question: With all the uncertainties in the world economy and markets, is it still wise to make investments in the stock market now?—Kris C. Lim, public relations practitioner

Answer: I have been taking note of all the developments worldwide particularly the economic woes of Europe and the United States.  Downgrading banks, debt default scares, increasing unemployment, recession and political instability are becoming so common that many are referring to our present situation as the “new normal.” Egad, it sure feels that all the business and economic developments we are experiencing will result in the rewriting of all the books as we know it. I don’t blame you for being skeptical in investing your money—I would be, too, and I actually am.

‘New normal’

With the United States and Europe so far from us, should we really be concerned? Definitely. Today’s borderless world economy has resulted in more economies being interdependent with each other. The United States, Europe and Japan are the largest of all markets and even if Asian countries have better fundamentals (and yes, the Philippines is definitely included), we will all feel the pinch as we are all covered by the laws of supply and demand.

To simplify, when people start to make less money because of a weakening economy, they will buy less of the goods and services we offer and that will not be good. A weakened economy will usually have a negative effect on profitability of corporations, and stock prices will likewise go down. When economies are not robust, people are also fearful of the future and investment markets react negatively.

Make a killing or be killed

Now back to your question. Should you invest now when we are under the ‘new normal’ environment? Well, the answer can be tricky. There are two scenarios that can happen. First, you can actually take advantage of the low prices of stocks and start bargain hunting. When you properly select blue-chip stocks that are profitable, well-managed and have a lot of good potentials, you can be sure that their prices will rebound when the market starts picking up.

Some prices are now at their lowest in months and buying them may be a good idea. On the other hand, buying stocks today might also be like catching a falling knife if the market continues to plummet. There is always that risk and buying a lot of stocks today with the current market condition is tantamount to speculating. When one speculates, he can make a killing or be killed—that’s just the rule of risk and return.

Personally, I would probably start looking for good-quality stocks that are now trading near their 52-week lows; just make sure that these companies have strong fundamentals and continue to be profitable despite the condition of the economy. However, it is unwise to have a high exposure or a big part of your portfolio invested at this conjecture as the market can continue to go south with no real recovery anytime soon.

Investment options

The whole European situation continues to make people fearful and that will be a cloud over our heads for an indefinite period of time.

You may also want to just invest through pooled funds like the UITF or Mutual Funds and leave all the trading, buying and timing to professionals who are focused solely on investing the funds. Experts actively managing funds can minimize losses during bearish environment and improve gains on bull runs.

If you chose to invest now in the stock market, or at any time for that matter, it is always prudent to look at this asset class as a long-term venture to weed out the volatility, or spread the risk over time. Further, do not be in a hurry to invest the bulk of your funds just yet because when the market does recover, it will not do so overnight and you will have time to re-enter the market when the trends are more evident.

Just a friendly reminder whenever you invest in the stock market or any other investment—consider your investment objective, time frame and risk tolerance first and foremost.

Be wise, stay prudent and be patient.

Originally posted at the Inquirer http://business.inquirer.net/25557/do-we-still-invest-in-times-like-these