Tips On How To Invest Before The Recession Starts: Recession Is Coming, Find Out How To Hedge Against It
A recession is coming; we all know that. The signs are all over the place, and a shift in the wind is felt by everyone who has invested during a recession before. It happens, and it’s usually pretty inevitable, really; the market can’t always be bullish, and sometimes a recession is a good thing in the long run because it resets the market after a while for profit. It’s almost a cycle, much like the cycle of life.
Historically, there are some indicators that have facilitated identifying when an economic cycle is coming to an end and a recession is coming, but some are not quite as certain as others. The stock market is a more “emotional” indicator and has and will behave in a very particular way that not necessarily predicts what the economic landscape will look like in the near future; however, we consider the following indicators to be very much on target when it comes to determining a recession:
1. Inverted Yield Curve. When the yield inverts and the interest rates on shorter term U.S. Treasury bonds are higher than the interest rates on longer term treasury bonds, this has historically been a pretty accurate indication that a recession is getting closer.
2. Low Unemployment Rate. A slowdown can very well be predicted when there´s a significant low rate of unemployment. A strong market has always been an indicator that an economic cycle is ending, rather than just starting, as most people would think. When unemployment has reached below four points there has always been a recession afterwards. Wages are growing and unemployment rates have reached 3.7, which represents a 50-year low.
If you go to the basics of an economic cycle, you can easily identify that there´s a recession coming. We´ve had a long run of economic expansion since 2009, and of course this cannot and will not continue forever. So, we could very well be overdue for a recession.
Now, while it’s good for long-term gain, the short-term gain does not look very optimistic. This is a time when many investors turn more conservative in their investing and even risk-taking investors tend to put their money back and save it until the recession blows over.
So what, as an investor, can you do to weather this storm? Well, there are a lot of safe bets that a lot of investors do. Bets that can include bonds and market CDs, or by keeping their money shored up in stock assets, securities, or funds. Some investors even go the non-typical route and invest in other ways that they know will pay off in the next five or so years when the recession starts to turn to a full-on growth.
In fact, it’s a growing trend right now among investors to go the non-traditional route. Bonds and CDs are fine, but they typically don’t earn anything beyond inflation, and stocks and securities can falter and fail in a traditional market. The recession hits them too, and even safe bets that give decent returns can fall apart and fail if you’re not too careful where your money goes.
With non-traditional assets and tools, you have a fairly new way to not only save, but also make money in the end. After all, these are new tools being developed for the purpose of making money and being relatively non-traditional is what makes them perfect to invest in because they tend to weather the recession well. They’re quickly developing new paradigms that stand outside of the rules of the market, but work within it—even during a recession—to continue to profit.
So, what sort of non-traditional financial instruments are we talking about here? Well, there is the obvious for starters: peer-to-peer lending and truly most blockchain technology-based companies, but especially those involved in the fintech industry. One fintech company starting to make the rounds of discussion that has grabbed the attention of professional investors is a company claiming to have a new form of digital equity that they are calling a New Asset Class (NAC).
This NAC has been created for private companies to have more access to capital markets, and for investors to have a liquid instrument while still benefiting from the inherent characteristics of companies that remain private.
It starts with the first step that you take toward educating yourself. From there, you can fortify your defenses and get ready for whatever may come. Click the link below to learn everything you need to know.