For example, you'll want to avoid becoming a co-signer on a loan, taking out an adjustable-rate mortgage (ARM), or taking on new debt. Workers considering quitting their jobs should prepare for a longer search if they decide to find a new one later.
Diversifying your streams of income is at least as important as diversifying your investments. Once a recession hits, if you lose one stream of income, at least you still have the other one. You may not be making as much money as you were before, but every little bit helps.
During an economic downturn, it's crucial to control your spending. Try to avoid taking on new debt you don't need, like a house or car. Look critically at smaller expenses, too — there's no reason to keep paying for things you don't use.
Bonds and cash have historically outperformed most stocks during recessions. Selling stocks in favor of bonds and cash before a recession may leave you unprepared if stocks bounce back before the economy does, which has happened historically during many recessions.
Higher interest rates that often coincide with the early stages of a recession provide an advantage to savers, while lower interest rates moving out of a recession can benefit homebuyers. Investors may be able to find bargains on assets that have decreased in price during a recession.
Food and drink
Food and drink continue to be essentials during economic downturns. You may think that consumers turn to rice, potatoes, and tap water when money is tight, but this isn't always this case! Many times, luxury food and drink products perform well for a few reasons: People need comfort (like with candy).
Yes, cash can be a good investment in the short term, since many recessions often don't last too long. Cash gives you a lot of options.
In general, a recession lasts anywhere from six to 18 months. For example, the Great Recession that started in December 2007 lasted 18 months. But the recession prompted by the pandemic in 2020 only lasted two months. When a recession is on the horizon, it's impossible to know how long it will last.
Increased stress all around. One of the most prevalent ways that recessions affect the average person is simply that stress goes up. It doesn't matter if you're comfortable in your job security and have a hefty financial cushion, or if you're struggling to make ends meet and have $100 in your savings account.
When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses.
The unemployment rate almost always jumps and inflation falls slightly because overall demand for goods and services is curtailed. Along with the erosion of house and equity values, recessions tend to be associated with turmoil in financial markets.
Historically, during times of recession, the value of gold has sometimes increased. For example, in 1973 and 1974, the stock market fell 17.37% and 29.72%, respectively. But during those same years, the price of gold increased 73.49% and 67.04%. Similar trends can be seen in 2002 and 2008.
Invest for the long term
Contrary to what you might think, putting money into assets such as shares during a recession could be a good idea. It might mean you can buy some bargains among the companies whose share prices have fallen amid the stock market turbulence.
ITR Economics is forecasting that a macroeconomic recession will begin in late 2023 and persist throughout 2024. Business leaders recently had to lead their companies through the recession during the COVID-19 pandemic, and some were even in leadership positions back in 2008, during the Great Recession.
The UK is expected to avoid recession in 2023 and start to return to trend growth rates towards the end of next year but its recovery is still underperforming compared to G7 peers, according to the latest edition of PwC's UK Economic Outlook.
The economy looks to have fared better than expected in first half of 2023, and is set to steer clear of a recession, according to the CBI's latest Economic Forecast.
Will there be a recession in 2023? Most economists still expect a recession in the second half of the year. They say the Fed's high interest rates eventually will be felt more profoundly by consumers and businesses.
In short, if you have less than $250,000 in your account at an FDIC-insured US bank, then you almost certainly have nothing to worry about. Each deposit account owner will be insured up to $250,000 - so, for example, if you have a joint account with your spouse, your money will be insured up to $500,000.
If you have investments you'll need to cash out in the next two to four years to fund a short-term goal, it may be a good time to move the money into a high-yield savings account. A high-yield savings account can keep that money completely safe, accessible, and even help it steadily grow.
Ready.gov recommends you keep a small sum at home and the rest of your savings in an emergency savings account. Exactly how much to stash at home comes down to your family size and your daily expenses.
Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.
Guilty pleasure products like confectionery or alcohol, food, childcare, pet products, and others are great products to sell during a recession. Think of things that are necessities or things that consumers will buy regardless of their monthly budget (i.e products that are price inelastic).
Invest in recession-proof industries.
Fear of buying the wrong stock can be mitigated by investing in established, well-known businesses. Investors may want to consider sectors that generally do well in an economic slowdown, such as consumer staples, utilities and healthcare.