What's This Talk of a Recession?
In recent weeks, the word recession has started creeping into business news and financial market coverage. Inflation is running hot, gasoline prices are up, interest rates are climbing, and it’s hard to remember the last time the stock market had a winning week. Add in Russia’s aggression toward Ukraine, and it would seem that there are plenty of reasons to become discouraged.
Let's give some context though as to what a recession is and what it does. A recession is a macroeconomic term that refers to a significant decline in general economic activity in a designated region. It is typically defined as two consecutive quarters of economic decline, as reflected by GDP in conjunction with monthly indicators such as a rise in unemployment.
Should I be worried?
We investors should not have an excessive fear of recessions. Believe it or not, they are a normal component of the business cycle and are unavoidable. Did you know that since the Great Depression of 1929, recessions have occurred in a consistent cycle every 4-5 years on average? They have been referenced as a sort of "pitstop," a time to make adjustments and new assessments during an ever growing and changing economy. It has even created opportunity by providing lower stock prices and weeding out short term speculators. But by the time the recession is over, long term investors who stayed the course will ultimately be the ones who are aligned to reap the benefits of the recovery. Notice below the historical returns before a recession, during a recession, and the recovery years after:
Remember, history provides guidance, not answers. This is why we spend the quality time with you putting together an investment plan. This plan does not include panic or reactionary measures. It’s built to hone in on your objectives and goals while holding true to your risk tolerance and investment discipline. Day in and day out our team works on your behalf to make sure you are continually in alignment with those objectives — so if there is a need to make any adjustments, you will hear from us.
we’re here to help
We trust you’ve found this review to be educational and helpful. If you have any questions or would like to discuss any matters, please feel free to give me or any of my team members a call.
As always, we’re honored and humbled that you have given us the opportunity to serve as your Life-Centered Planner.