The S&P/ASX 200 Index (INDEXASX: XJO) crashed 7.33% lower yesterday as coronavirus concerns and an oil shock wiped $137 billion from the Aussie sharemarket.
Why are ASX 200 shares crashing lower right now?
Ongoing concerns around the coronavirus outbreak continue to weigh on markets. There were only three ASX 200 shares that climbed higher yesterday in the worst day of trade since the 2008 GFC. However, there were bigger problems troubling investors on Monday.
Disagreements between Russia and the Saudi Arabia-led OPEC cartel over the best way to manipulate oil prices in the wake of the COVID-19 outbreak has hit valuations hard. Crude oil prices fell 30% lower as Saudi Arabia threatened to flood the market with supply and force prices lower. That sent shares in ASX 200 oil and gas producers like Oil Search Limited (ASX: OSH) plummeting as much as 35% lower on Monday.
The Australian Financial Review (AFR) reported Westpac chief economist Bill Evans expecting to see the Australian economy slide into recession. The wide-reaching impact on global supply chains and disruptions across key sectors like education, tourism and mining are all risk factors for the Aussie economy.
With ASX 200 shares falling lower over the past fortnight, there are shades of the 2008 GFC in the markets right now. Investors are now pricing in a further 25 basis point cut to the official cash rate to 0.25% in April. The central bank may be forced to slash rates to boost the economy following the March 2020 cut.
That's likely to put pressure on the Big Four banks' profit margins in 2020. There aren't many tailwinds for the Aussie economy that are obvious right now. Even if the coronavirus threat subsides, the trigger may already have been pulled. So, which ASX 200 shares could be in the buy zone in the event of a recession?
Which ASX sectors are good in a recession?
It's best to look for defensive sectors if you're wanting to protect your portfolio. A supply-led recession could be a very different beast to what we saw in 2008. I personally think the Health Care sector could have good buy options in a recession.
I'd look to Ramsay Health Care Limited (ASX: RHC) as a medical provider with non-cyclical earnings. Similarly, the CSL Limited (ASX: CSL) share price could be a buy given its significant research and development activities.
You could also buy an ASX 200 gold mining share like Newcrest Mining Limited (ASX: NCM) for defensive exposure.
