Broker Check

Recession Myths and Realities

August 16, 2019

As I write this essay on August 14th, the Dow has dropped 800 points to close at 25,479. The financial media is falling over itself calling for a recession. Today's headlines: 

"Dow tanks 800 points in worst day of 2019 after bond market sends recession warning."

"Main yield curve inverts as 2-year yield tops 10-year rate, triggering recession warning." 

We at Atchley Financial Group are not convinced a recession looms on the near-term horizon. We don't know that for a fact, but that is our opinion. By most metrics, the US economy is in good to great shape. So, what happens to your money when - not if - we enter the next recession? It may not be as bleak as you think.   

According to the American Funds "Long View" essay (April 2019), recessions have been relatively short. The current economic expansion has been longer than the last 10 recessions combined. The average recession since 1950 has led to a contraction of less than two percent of GDP, while expansions have grown the economy by an average of about 24%. 

A few more recession statistics from the American Funds "Long View" essay: 

You will note that the S&P 500 index actually went up during the average recession. 3% might not seem like much growth, but I'm impressed that the market went up at all during the average recession. And we hope that the eye-popping 117% S&P 500 average return during expansions will help you stay the course with your finely crafted portfolio when the next recession appears. 

We know that these roller-coaster days with stocks can be a bit unnerving, so please know that we are here to talk with you at any time.