Can You Afford to Lose Money in the Next Recession?


As a syndicated columnist for a bank network, Richard’s articles appear weekly on the websites of more than 100 regional and community banks. He has been an editor or contributor on more than a dozen books, including Webvisor, Wealth Exposed, 5 Steps for Selecting the Best Financial Advisor, and The Retirement Bible.




Can You Afford to Lose Money in the Next Recession?
Can You Afford to Lose Money in the Next Recession?


In 2020, the pandemic and other factors contributed to a mild recession. More recently, despite predictions of a recession in 2023, the US narrowly avoided it - for now.

From a historical perspective, a recession is likely at some point. In fact, recessions have come and gone at least 17 times in U.S. history. While it is a good thing that all these recessions eventually ended, they left in their wake millions of people with shattered retirement funds. Can you afford to join their ranks? 

What Exactly Is a Recession?

When a recession hits, the story is all over the news. Besides that, you know when times are hard. But have you ever wondered what the word “recession” means precisely? The truth is that even experts may disagree about the exact definition. While there’s general agreement that a recession is a time when economic activity declines, the National Bureau of Economic Research (NBER) puts it this way:

“[A recession is] a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”

Others have stated that a recession is a time when the GDP declines for two quarters in a row. In simpler terms, a recession is a time when living gets harder. Many people are unemployed, it gets harder to pay your mortgage, your business struggles to survive, and your income may drop. On top of all that, any stocks you might have will likely drop in value. 

Who Can Predict a Recession?

You may hear economic experts predict a recession, but actually, no one can really know when a recession will hit. Many people in the know believed that there would be a recession in 2023. That didn’t happen. That doesn’t mean a recession won’t start tomorrow. 

Factors That Contribute to a Recession

Here are some of the events that can come together to trigger or worsen a recession. 

  • Lenders overextend credit
  • Lenders take on risky loans and investments
  • Central banks drop the prime interest rate to a level that’s too low to be sustainable
  • People see the low interest rates and jump into a mortgage they won’t be able to pay if interest rates go up again
  • Overoptimistic companies expand beyond their ability to sustain in a tighter economy
  • Overenthusiastic investors sink all their money into the stock market
  • The supply chains are disrupted, as they were during the pandemic
  • Retailers reduce their inventory, making goods scarcer and more costly for consumers

And these are events that happen during a depression:

  • Inflation goes up
  • Central banks raise their interest rates to bring down inflation
  • Companies lay off more employees
  • Fewer new jobs are created
  • Consumers spend less to try to make ends meet
  • Corporations tighten their spending
  • Manufacturers slow production
  • The unemployment rate climbs
  • Wages stay stuck at inadequate levels or may even drop
  • More businesses fail than usual

What Happens in the Stock Market During a Recession?

If you have all your money in the stock market, you might want to rethink that. While there are times when the stock market performs well, that’s not the case during a recession. The stock market usually falls, and it can fall quite rapidly. For example, during the Great Financial Crisis of 2008-2009, the S&P 500 fell 48% in about six months.

Now, imagine how you would feel if your entire stock portfolio was cut almost in half in six months. Or maybe that already happened to you. In any case, those who tried to get out by selling lost the most, while those who hung onto the right stocks - stocks for companies that survived the recession - for long enough may have eventually seen gains. Either way, it was a difficult time, especially for those entering retirement.

What Can You Do to Protect Yourself?

Recession is coming. Maybe not today, maybe not tomorrow, but it will almost certainly come again, and probably in your lifetime. How can you avoid or minimize your losses? One way is to buy investments that don’t follow the track of the stock market. Gold is such an investment.

When you invest in a gold IRA, you have more peace of mind. Why? It’s because gold typically has an inverse relationship with the stock market. When stocks go down, gold goes higher. In addition, gold is a physical asset that always has intrinsic value. In contrast, a stock certificate is worth nothing if the company goes under.

Does that mean you should put all your money into gold? Not necessarily. You can have a balanced investment portfolio that includes stocks, bonds, precious metals and other investments. The key is to be sure you’ll still have something left, no matter what happens to the economy.

Is Gold the Answer for You?

Gold is an excellent investment for those who want to retain value despite economic hard times. If you’d like to learn more about gold and how it responds to market changes, ask the gold IRA experts at True Gold Republic. We’re here to help you understand the value of gold and how it can improve your investment portfolio. As providers of gold and silver for precious metals IRAs, we can help you add gold to your portfolio and offer exceptional customer service along the way. Contact us now to learn more!

Interested in learning how to buy gold and buy silver?

Call 1-800-300-(GOLD) and speak with a Precious Metals Specialist today!


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