How to invest during a financial crisis

Uncertainty creates fear, but it also creates opportunity.

In times of crisis, the instinct to retreat is strong, yet history shows that smart, strategic investing during turbulent periods can lead to some of the greatest gains. Here’s how to stay calm, stay informed and make your money work for you when markets are anything but predictable.

Table of Contents

1. Which Assets Should a Portfolio Include?
2. Identifying Investment Opportunities Amidst Economic Uncertainty
3. Real Assets as an Alternative
4. Time to Re-Evaluate your Portfolio

A financial crisis is often defined as "a time of great disagreement, confusion, or suffering." We can agree that persistent inflation, rising interest rates, geopolitical tensions such as the US-China tariff disputes, the consequences of the COVID-19 pandemic, the effects of which are shown in the graph below, and recent market volatility have left many of us feeling uncertain, cautious and overwhelmed. Many investors still feel insecure about investing in a volatile market after having lived through the 2008 financial crisis and the recession that followed. Despite the negative connotations surrounding the word "crisis," its origins in ancient Greek, where krísis means "power of distinguishing, decision, choice," suggests that it can also represent a turning point or even an opportunity - if we are able to spot it.

Nonetheless, uncertainty remains the dominant feeling in the current economic climate, and people feel a sense of unease when it comes to making decisions in such a tumultuous environment, particularly regarding their finances. Behavioural finance, a field of study that explores the psychological factors affecting economic decision-making, shows that certain behavioural traits can influence how we make decisions, one of the most prominent being loss aversion. This means that people feel the emotional pain of a loss much more intensely than the pleasure gained from an equal-sized profit. As a result, the potential for losses at present prevents most people from seeing the opportunity, even challenging financial advisors in their assessments.

In such a scenario, many portfolios need to be re-evaluated to protect investors from losing money or to prevent assets from losing value.

Which Assets Should a Portfolio Include?

Traditionally, wealth managers create portfolios with a mix of around 60% in equities (stocks) and 40% in bonds. Equities offer higher growth potential but come with greater risk, particularly during periods of market volatility. Bonds, on the other hand, provide a more stable income but may offer lower returns during times of economic uncertainty. However, given the current financial environment, this traditional recipe may need to be revisited to improve portfolio performance.

With inflation running at 2.8% in February 2025 (Office for National Statistics) and government bonds currently providing low returns, equities and bonds alone may not be sufficient for hedging risk. That said, analysts still project strong long-term performance for both asset classes.

Gold remains a reliable asset class during times of economic distress, with its steady performance and ability to hedge against inflation. Historically, gold has acted as a safe haven during turbulent times, maintaining its value and even appreciating during periods of market instability. As of April 9, 2025, according to Barron's gold has gained 12% year-to-date, highlighting its potential in uncertain markets.

In any case, assets like stocks and bonds continue to be a better alternative than cash savings. If an investor had placed £10,000 in a savings account a decade ago, with accumulated interest, the account today would have the equivalent of only £7,500 due to inflation. Therefore, investing is still the safest choice. Long-term projections indicate that investments made today, though subject to short-term fluctuations, should generate considerable returns over time.

Identifying Investment Opportunities Amidst Economic Uncertainty

Even amid uncertainty, there are still plenty of investment opportunities. Collaborating with a wealth manager to assess these opportunities can help safeguard your investments and identify potential growth areas. A well-diversified portfolio, encompassing equities from various sectors and industries, offers enhanced protection against sudden market fluctuations. By investing in uncorrelated assets, you can effectively reduce the overall risk of your portfolio.​

Credit Card Companies and Inflation Dynamics

For instance, credit card companies exemplify how the market adapts to inflation. As inflation rises, consumers tend to spend more, leading to increased transaction volumes for credit card companies. While the percentage fees they charge per transaction remain constant, higher overall spending results in greater earnings. This scenario presents a potentially profitable opportunity for investors. However, it's important to note that recent economic challenges have impacted fintech companies, with Barron’s saying firms like Block are experiencing significant losses amid inflation concerns and economic uncertainty.

Growth Potential in Various Sectors

While technology stocks have faced downturns in the past year, many other sectors continue to offer promising growth potential:​

• Renewable Energy:

Companies involved in the transition from fossil fuels to renewable energy are likely to see sustained growth as demand for clean energy rises, especially with the ongoing push towards sustainability. According to Deloitte the renewable energy sector is projected to be the fastest-growing energy source, potentially achieving a 34% growth rate by the end of 2025.

• Hospitality and Tourism:

Similarly, the hospitality and tourism sectors, which were significantly affected by the COVID pandemic, are now recovering, with travel demand rebounding globally. This resurgence could present investment opportunities as consumer confidence and travel activities increase.​

• Healthcare, Utilities, and Consumer Goods:

Additionally, the healthcare, utilities and consumer goods sectors continue to offer solid prospects, as demand for essential services remains steady. These industries are less susceptible to economic cycles, potentially providing stability to investors.​

Real Assets as an Alternative

If equities feel too risky, real assets such as property and infrastructure funds can offer more stability and steady returns. According to RCN capital, real estate investments, particularly those with rent reviews tied to inflation, can ensure that rental income keeps pace with the rising cost of living, thereby preserving and potentially enhancing returns in an inflationary environment.

Similarly, infrastructure investments in essential services like utilities and transportation provide consistent cash flows and long-term growth potential. Goldman Sachs says these assets are often characterised by long-term contracts and regulated business models, which contribute to their predictable revenue streams.

Investing in infrastructure development, especially in sectors such as renewable energy and urban development, is gaining attention from institutional investors. Per the World Economic Forum, these projects not only offer predictable returns but also align with global sustainability goals, making them attractive in times of market volatility.

Incorporating real assets into a diversified investment portfolio can provide a hedge against inflation and economic uncertainty, offering both stability and potential for growth.​

Time to Re-Evaluate Your Portfolio

In times of financial uncertainty, it's crucial to re-evaluate your portfolio to ensure it is still aligned with your goals, risk tolerance, and the current economic conditions. Whether you're considering new investments or simply reviewing your current holdings, talking to a wealth manager is a smart move to ensure your portfolio remains resilient during these challenging times.

With a thoughtful approach, strategic diversification, and long-term focus, investors can still find opportunities to grow their wealth, even amid a financial crisis. For more information on the current economy affected by the imposed US tariffs and how it may affect your investments, see our article here.

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