Financial Planning in the Case of a Recession

During times of political tension, economical uncertainties, and ongoing stock market volatility, a recession often crosses the minds of consumers, personal investors, bank leaders, and investment company brokers. While a recession is not a time to celebrate, it is a time to re-evaluate financial planning strategies and investment portfolios. A recession typically happens due to a number of causes and results in several outcomes. Investors use this time prior to a recession to ensure they can count on stable portfolios that will weather the storm.

Typical Recession Causes

Typically, the major cause of a recession is tied into inflation, in which the nation experiences a steady rise in the prices of goods and/or services, generally over a period of time. Other recession contributors include hikes in interest rates and wage reductions. The recent worldwide tariff implications and some trickle-down effects are also known to be a factor. In fact, a waning consumer confidence — before there’s even a real issue — is often another critical recession contributor. The media certainly plays a role in the levels of consumer confidence.

Typical Recession Outcomes

Once the country is in a recession, the outcomes generally include a variety of undesirable scenarios. The country experiences a negative economic growth period in which gross domestic product (GDP) falls, a slowdown (or slump) in the stock market, unemployment rising, incomes falling, and as with everything, an increase in our national debt. Interest rates can be cut as a result, and then investors see their asset values as lowered. The average period for a recession is about one-and-a-half years, although historically there have been more extended recession periods – see History of Recessions in the United States. The Great Depression of 1929, for example, lasted 9 years.

Interestingly, all of these scenarios have been in the positive since the 2016 presidential election. So even while the economy, unemployment, and the stock market have been extremely outstanding, economists and the media believe “it’s too good to be true,” and that “a recession is due.” Even in good times, investors, bankers, and the media tend to panic. What to do?

 

Gold in a Recession

During a period of lowered economic growth, known as a recession, investors seek alternative assets to hedge against in action. Gold is a favorable alternative to the dollar, although the demand for Gold then drives the prices higher. Savvy investors turn to precious metals as a means to withstand the woes of the recession. Fear buying is also a factor, in which some consumers make a gold investment for the wrong reasons, even driving up demand and value. Gold is proving to be a viable source of longer-term returns. It is used to diversify existing investment portfolios in order to ease loss when the market is stressed. According to a Kitco.com article by Jim Wyckoff , entitled Gold, silver gain on safe-haven, technical buying, “Geopolitics is on the front burner of the market place early this week, which is helping to lift the safe- haven metals.” Another positive factor gold is that it has minimal credit risks compared with our current system of at currency. Gold can enhance an investment portfolio most anytime, but especially during a recession.

How Best to Make a Gold Investment

A gold investment is a known safety net during times of market and economical stress. Even the smartest investment banker will tell you not to sell your assets during a recession, but adjusting your financial portfolio to include Gold can be a worthwhile move. Whether you want to invest in physical Gold as a luxury, Gold as an individual retirement account (IRA) or another form of Gold, the advantages can bring peace of mind in the case of a recession. Gold comes in many forms: coins, one-ounce bars, Valcambi bars, IRAs, and more. The rest step in how best to make a gold investment is to speak with a reputable, privately held gold company that specializes in precious metals to learn about your options. Reagan Gold Group has long been a supporter of physical gold investments. Find out more about Gold in order to hedge against in action. Now is a perfect time to engage in some additional financial planning in preparation for a recession.

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