Recession

Recession would mean that our economy is in decline. Prices are up because supply is down. People are holding onto their money and spending less frivolously. The market gets sluggish because of the mass response. Across the US, sobering housing statistics are beginning to reflect the sharp slowdown over the past year. U.S. home-price growth slowed during the second quarter from a year earlier in the sharpest three-month plunge on record, according to a government report that indicates this year's housing slump is deepening. Said one market analyst, "We’re 99% sure that we’re going into a recession. A serious bear market is possible". But the funny thing recently a Blue Chip Economic Indicator report based on a group of economists came out and the consensus indicated expectations that growth will be sluggish into next year and no recession!

There exist tenable indicators present in every Recession. They are logical and historically related to economic weakness. Any one of them is not conclusive but when there is a confluence, the risk of Recession rises dramatically. Interest rates, in fact, have been hovering at or near 50 year lows since that time in most developed nations including the US and UK, and have only recently begun to rise back to historical norms in the face of worldwide economic pressures.

Another obvious sign is the Falling stock prices. We are below the 200 day moving average. This is a line of demarcation. The additional price of gas has and will affect everything. There is just so much money in our wallets and so much we can press onto our credit cards.

History seems to repeat itself; maybe we could learn something about the current possible recession by studying this country's recession history. In late October 1929, Wall Street collapsed. We all know the effect the depression had on stock values. The Dow lost over 88% of its value between 1929 and 1933. It made a nice rebound following the depression. It increased 345% over the next 4 years. Recessions are relatively short and can be very violent to investors in the stock market. The expansion period following recessions are much longer and historically quite good.

When Federal Reserve Chairman Ben Bernanke insists that the U.S. is not headed for recession, my ears start to perk. When I hear that Bernanke forecasts slower growth in 2008, I am relieved. Slower growth is far different from a recession. Slower growth is still growth. Slow growth means we're still moving forward. Properties are still being built. Business is still moving. There is still progress. It's just not at the pace that we were used to enjoying.

No matter what economic situation you have to face, there are opportunities. Make sure you understand the market. All you need is accurate information and know what to do with it.