Investing for the Next Recession

The last nine years have been great for the stock market, but markets are always cyclical. It’s only a matter of time until another recession arrives.

When it will come is anyone’s guess. While I am not going to venture a prediction, some economists think the U.S. economy could enter a downturn by the end of next year, or in 2020—the year we have our next national elections.  Wouldn’t that be an interesting combination?

Despite speculation in the press, however, most people are less concerned about when a recession might arrive than how it will affect them. How will jobs and home prices fare? What about the bond and stock markets?

If you are still working (that is, not retired) hopefully you have a job that will make it through an economic downturn.

If you own a home and plan to stay in it for years to come, remember that a decline in value has the silver lining of lowering your property tax bill. But if you plan on selling your home in the next year or so, it may be prudent to speed up the transaction. If you are looking to buy a home, be patient, as prices may be coming down. On the other hand, interest rates could be higher in the future, so you will have that conundrum to solve.

What can you do about the bond and stock markets?  You can’t change them, of course. But there are several techniques you can use to help you weather a downturn.

A recent Yahoo Finance article by Rick Newman has some good advice for investing during a recession. Here are a few of the most important tips:

  • Don’t try to time the markets by making big, all-or-nothing moves.
  • Invest in short-term bonds rather than those with longer terms—especially if they’re low-quality.
  • To minimize the pain, focus on value stocks instead of growth stocks.
  • Rebalance your portfolio. Take money out of investments that have performed well and put it into those that have lagged.

These are all investing techniques we heartily recommend at Conlon Dart.

If stock market volatility over the past month has you worried, we suggest you spend a few minutes reading the brief Yahoo Finance article. If there’s anything in it you’d like to discuss, please feel free to give us a call.