Funds and Recession

Recessions have historically had devastating effects on funds in the market place. For a perfect example, we only have to look back to the last recession. Officially this started in 2000 and ended in 2002. Funds peaked in March of 2000 and didn’t bottom until October of 2002. This is only a 2 year period. Looking back it doesn’t seem long, but when you’re watching your funds go down nearly every day, two years seems like an eternity. The Dow Industrial Average dropped over 50% during that period of time while the Nasdaq Index dropped nearly 75%. The good news is that 6 years later, The Dow finally broke even again. The bad news is the Nasdaq has only regained about half what it lost; 8 years later.

Is it a fluke that this kind of fund carnage happened during the last recession? The resounding answer is NO. Funds and Recession seemed to be joined at the hip. Recession goes away and funds seem to be fine. Recession shows up and funds take a hit. You would think as soon as a recession shows its ugly head, everyone would want to leave the market and get into something a little safer, like cash or bonds. Well, that’s a little easier said than done. Most economists don’t agree that we’re in a recession until its already over. The official agency that lets us know of a recession doesn’t usually let us know it’s started until 18 months later. Usually they don’t last much longer than 18 months! When the officials can’t agree or get it right in a timely manner, how is someone with a REGULAR job supposed to?

Since funds and recession are so closely linked, and the government or economists aren’t going to tell us what is going on until it is too late, how is a guy supposed to protect his assets through a recession? I think the answer to that is in tracking supply and demand in the stock market. For help with this go to economy carberator .