8 Things that Happen During a Recession


GONNA talk about eight. Things usually hassle ate during recession comfy here you go number one stocks drop generally speaking the drop about start drop about six months before the recession and according to the capital group which is the folks behind the American family of funds the start to rebound about six months into recession and that they've recoup their losses over about eighteen months so usually it's. It's not too bad. the average loss during recession depends on how you look at it but it's like twenty to thirty percent some of in very shallow that said the last two recessions we experience at the dot com crash and the great recession. Those were declines a fifty percent. It took more than five years for the stock market to recover but basically this is why we always say any money you need. The next few years should not be in the stock market number. Two rates also dropped so it's already started. They could continue to go lower. The Federal Reserve is going to meet a week. Everyone expects them to drop the Fed funds rate by twenty five basis points. Maybe fifty basis points around the world. There's this is phenomenon of negative. Interest rates hasn't happened yet in America but Alan Greenspan recently just told CNBC. It's only a matter of time so rates. Could it keep dropping. What does that mean well. Ideally you could refinance your home. Get a lower mortgage. Guitar Refinance Your Car Loan Student Loan. Hopefully your credit card rates also get out so that's actually pretty good news number. Three bonds hold up depending on the bonds so generally speaking when rates go down bounds go up as we've seen that this year bonds actually made almost ten percent so far in two thousand nineteen which is a pretty extraordinary turn for bonds in two thousand eight when the S. and P. Five hundred went down thirty seven percent bonds. I went up five percent. The only thing is it does depend on the type of bonds treasuries do well corporates do generally okay but it depends on how far you go down the the credit rating. When you're looking at junk bonds they do not do so well. They lost twenty percent and two thousand eight so the more you are concerned about a recession the more you should keep your bonds to treasuries or highly rated corporates or maybe just play it safe with cash number four. The price of your house actually might go. Woah so I think a lot of us were stung by the great recession and that was really the first time when we saw a nationwide drop in home prices the truth is when you look at recessions historically home prices actually hold up well and there was a study by Mark Mark Holbert published in Market Watch we found that when when you look at the case Schiller Index of home prices that actually does better during stock bear markets than does during stock bull markets so historically in in most cases. Your House is actually a good hedge against the recession against inflation and its stock market drop however during the great recession what we saw last time that was not the case so there will always be outlived. Generally houses hold up pretty well number. Five inflation generally goes down so this is the upside of downtrodden economy economy. Prices generally do go down. So what does that mean for you well. It's actually a really good time to make a major purchase by a car. Get an appliance because all those folks out there trying to get consumers to come in and buy something so if you have the means and you're looking to make a good perk big. Purchase recession is actually a good time to do it number. Six employment goes up so according to the Washington Post the unemployment rate has risen two point four percentage points on average during the eleven recessions since World War Two so it goes up slightly but of course sometimes it could be worse. What was the worst since World War. Two was the last one the great recession unemployment went from five percent to ten percent on average. People were out of a job for six months so that's a good frame for what we talked about the Emergency Fund how much you should have and the way to prepare for this of course is to have the emergency fund but also keep your debt levels manageable because that's where people get in trouble to have high debt levels. They lose their job and they could no longer pay the mortgage or anything else so they they lose the house or they lose the car. So have the Emergency Fund and keep your debt levels manageable number. Seven employers reduce benefits so even if you are fortunate enough to remain among the working chances are something we'll get reduced. That's right. You may not get a raise. You may not get the bonus. Your 401k match might get eliminated. That's happened. Here is then the for kindly made up for it. Retroactively that usually does not happen so you'll see stuff like that. You may not have fancy holiday party at the end of the year might be in the conflicts in how we've done that too potluck instead of a fancy party downtown but so even if you do have managed to keep your job and most people will all you do have to expect that you'll probably have to tighten your belt a little bit somewhere another and number eight intersection stocks do go back up in the economy eventually eventually recovers so for those who have the cash on the sidelines and the guts buying stocks in the middle of recessions can actually be one of the best investments you ever made but you can't wait until the recession over is over because the stock market begins to recover before the overall economy but history has shown. US economy will recover you will be able to go back to the Fancy Politics Party at the hotel downtown and stocks will eventually they will recover and reach higher

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