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The potentially negative impact of a recession on personal finances and lifestyles often brings up feelings of apprehension and uncertainty. The NBER or National Bureau of Economic Research, a non-profit organization, determines recession start and end dates by analyzing economic indicators such as retail activity, payroll changes, and personal income. A two-quarter decline does not explicitly equate to a recession, as the NBER looks for a more enduring and widespread drop across the economy.
The lag time between policy measures and their impact on the economy presents a challenge in combating a recession. For instance, if the Federal Reserve increases interest rates, it may take some time before the effects of that action are noticed. Nevertheless, there are ways to take advantage of the opportunities that arise during a recession with the right knowledge and strategies in place.
While there are measures in place to combat the impact of a recession, it's important to note that the economic science behind it is not exact. As a result, the Federal Reserve must walk a tightrope to balance the need to cool down the economy when inflation is too high, without causing a major recession. Jerome Powell, the chairman of the Federal Reserve, has reported that tightening, such as increasing interest rates to slow down the money supply, is not finished and is likely to continue for some time.
It's important to recognize that a recession can have a significant impact on many people's lives, particularly in terms of employment. While it may seem like a negative event, there are ways to make the most of a recession, particularly in terms of investment opportunities.
As a result, those who have been laid off, as well as others, may reduce their spending due to concerns about more layoffs or a lack of income. Unfortunately, losing a job can also mean losing access to medical insurance, adding additional economic issues to an already challenging situation.
This decrease in purchasing power means that everything in your savings and everything you're about to buy goes up in price.
While these challenges can be overwhelming, it's important to remember that there are ways to use a recession to your advantage. By taking proactive steps to manage your finances and make smart investment decisions, you can weather the storm and even come out ahead.
It's important to note that borrowing becomes more costly when the Federal Reserve or FED raises interest rates to combat inflation.
Buying low and selling high is the most common investment strategy for a reason – it's how you make the most money, especially in the stock market. However, panicking and selling at the worst time can result in a loss and surrendering a potential gain that could have been obtained by being patient and letting the market work on its own.
In the next section, we'll explore some specific strategies for making the most of the 2023 recession and turning it into an opportunity for financial growth.
In the midst of the Great Recession, I saw an opportunity in real estate despite market devastation. By researching the market and recognizing the low pricing, I made my first big break into the industry as a college graduate. While many struggled during this time, I knew that not everyone was broke and that there were still opportunities to make a lot of money through smart investments.
While investing heavily in a single stock can be risky, and ETFs can still be affected by market volatility, income funds can be backed by assets that are not related to the stock market, providing a stable and reliable income stream even during a recession.
As I mentioned earlier, buying the dip is a popular investment strategy during down markets, but there are other opportunities to consider as well.
These funds can often be backed by assets that are not related to the stock market, providing a stable and reliable income stream during a recession. In fact, this is the reason why the Saint Income Fund was created, to provide investors with an option to match stock market returns while still having the flexibility to get their money back quickly and having the income come from real estate instead of publicly traded companies.
While homeowners may struggle with their investment during a recession, particularly if they lose their job or have an adjustable-rate mortgage, real estate investments can still provide a good source of income.
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.