Despite what anyone says, no one knows if we are in a recession. It takes six months of declining economic activity for the economy to be declared officially in a recession and so far there has been at most one month of decline. We won’t know for sure until June of this year and a lot can happen between now and June.
Still, we are obviously facing a slowdown in many parts of the economy. If we are going into a recession, here are a few thoughts that might cheer you up and guide you.
First, recessions in the postwar world tend to not be that deep. They last on average about ten months. Unemployment rises by about two percentage points. The stock market usually–not always–recovers well within a year. No recession has lasted more than 15 months in the postwar era. More than 90 per cent of willing workers will be employed even at the worst periods. People will still need cars, trucks, life insurance, shirts, socks, and colonoscopies. In certain areas, money will still be being made.
That said, you do not want to be caught off guard and off balance.
Keep a good solid chunk of liquidity, also known as cash or very liquid assets. You do not want to have to sell your home into a declining market to get cash in a pressure squeeze. Be the first to work and the last to leave. If there are to be layoffs at your place of business, make sure the boss knows you are the last one to be laid off. Be the most eager, most enthusiastic member of the team, and you maximize your chances of staying on the team.
If you can, defer major purchases that would have a seriously adverse effect on your liquidity.
If you can, and if you have the cash, buy broad indexes of stocks. The time to buy them is when everyone else is fearful and terrified, as they are now.
Most of all, know that the hard times will not last. The government has major weapons to use to fight recessions. True, they are a bit slow off the mark this time, but eventually these weapons will take effect. It looks extremely dismal in a serious recession, but they always end. It will get better, I promise, even if takes a while.