There is a good chance that we have entered into a modern-day recessionary economy or possibly we have been in a recession over the past year. Time will tell.
According to the National Bureau of Economic Research (NBER), recessions last on average 17 months going back to 1854.
Using historical data, the NBER determines when a recession begins and ends. The NBER makes their determination based on indicators, including GDP, payroll employment, personal income and spending, industrial production, and retail sales.
Since 1980, the United States has experienced seven recessions if we consider we are currently in a recession. The prior six recessions lasted on average 10 months.
So, what should you consider investing in, as you determine your investment timeline, your financial goals, and your overall risk tolerance? Allocating a portion of your investment funds into multiple different asset classes based on the above three considerations will help you reduce the risks associated with investing.
Here are seven fund categories to help you diversify your investment strategy in a recessionary economy:
- US Treasury Bonds
- Municipal Bond Funds
- Corporate Bonds
- Money Markets — Cash
- Hedged Equity Funds
- Utility Funds
- US Large Cap Dividend Funds
Utilizing and allocating funds into these categories based on your objectives will help you in balancing your overall investment risk while diversifying your overall portfolio. Recessions don’t last forever, and markets have historically always recovered and moved higher after recessions. It is also important to know recessions are difficult to determine.
Historically, no two recessions have been the same and the stock market has responded differently during each recession. There is no doubt that we are in interesting times in the investment markets in 2023 and thus it is important to build an investment strategy that is suitable for you to continue to invest, even during recessionary times.
Cal Strong is a financial advisor, with offices in Mesa, Ariz. and Aurora, Neb. His localoffice is located in the East Valley at 3654 N. Power Road, Suite 156, in Mesa. Cal can be reached by phone at (480) 499-0301 or by email at cstrong@strongag.com.
*Securities and investment advisoryservices offered through Woodbury Financial Services, Inc. (WFS), Member FINRA, SIPC. WFS is separately owned and other entities and/or marketing names, products, or services referenced here are independent of WFS. WFS does not provide tax or legal advice. Insurance services offered through Strong Advisory Group, Inc., which is not affiliated with WFS