How Protect Yourself From The 2019 Recession
Economists surveyed by the National Association of Business Economics say a recession will happen in 2019 and two-thirds believe it’s inevitable by 2020.
Authors Disclaimer: This is not Professional Investing Advice. So take it all with a grain of salt and always do your own due diligence or consult with a certified financial advisor before making any investing decisions.
Raised on our parents’ and grandparents’ stories of the Great Depression—about cleaning our plates and boiling shoe leather for dinner—we came to associate the crash with fear and skepticism.
It proved true in 2008, and the Great Recession remains a sore spot in our memories. A time of uncertainty and panic. The stagnating wages and unemployment that followed still taunt, and lead many people to question the stability of the current market, which is growing quickly as ever and heading for a crash.
Yet a recession is the inevitable outcome after years of expansion, and it restores balance to the economy. As the market continues to rise—now in its ninth year, and the longest bull market in US stock market history—that inevitability inches closer.
Why Are Economic Recessions Inevitable?
To understand why we are over-due for a recession and why they happen, it’s best to learn about Keynesian economics, and how economic expansions and contractions are built into the money system that we all use in modern day society. It’s not a good system. But it’s what we have. So learn the rules, because it is game with dire consequences if you choose to ignore them.
Despite what you might here from our politicians, and our mainstream media, the US economy is far from healthy.
Truth be told. We are seeing major bubbles in the housing market, auto loan market, student loan market, and the fiat dollar.
Watch the video below to gain a better understanding of our economy and how it works. Then keep reading.
Learn economics from the Worlds most successful hedge fund manager in a 30 minute cartoon
How likely is a Recession in 2019?
With the DOW hitting new record highs, and the S&P declaring the longest bull run in US stock market history, it’s no surprise that stock market valuations appear “overbought,” and economists note that continued expansion at our current rate is unsustainable.
In order for the market to correct itself, the current bull market will soon make that predictable and much needed downward turn. Half of the economists surveyed by the National Association of Business Economics say will happen in 2019 and two-thirds believe it is inevitable by 2020.
The end of a bull market is often described as “when stocks fall 20% or more from a cycle high”. The last time this happened was in March 2009, the lowest point in the worldwide recession.
Since then, we’ve been consistently climbing out of the recession, and as we continue to climb, we can, at any moment, reach our economic peak and then start the recession cycle over again.
Just because it’s inevitable, though, doesn’t mean it has to be painful. Taking action in 2018 is the best possible way to guard yourself and your portfolio against the eventual downturn.
Tip: The Government will likely keep denying a recession, MONTHS after it’s already begun.
How Can I Protect Myself From A Recession?
Tip 1: Diversify your portfolio
Diversity is still and always sound advice for a solid financial foundation. Keep in mind that this means saving cash rather than investing your entire nest egg. A slightly larger cash buffer will always give you more flexibility and make your portfolio more resilient in a bear market, but be warned.
But if you, like many, understand that the US Dollar is particularly susceptible to losing immense value during a recession, then investing in a more concrete and stable source of wealth, such as precious metals, is your hedge against a falling dollar and a smart way to secure your purchasing power for the future.
Gold has been a valuable form of currency for at least 14 centuries, and because it remains so difficult to mine, it isn’t susceptible to the same fluctuations of supply and demand as other types of currency. Putting 5-10% of your assets in gold is part of a diverse, resilient portfolio.
Temporarily Park Your Retirement Savings in Less Risky Investments
It’s amazing how many people have 401k’s or something similar like the Thrift Savings Plan (government employees) and have NO CLUE, on how to access their account or modify their holdings.
Any good retirement plan will allow you to modify your holdings based on the amount of risk you are willing to take on. It makes sense for someone younger to take on more risk and invest aggressively while an older saver may opt in for something less aggressive (safer), with a smaller return on investment.
For example, The TSP (thrift savings plan) has a number of options that a federal employee or military person can invest in. They can invest in the C-fund which mimics the S&P 50o, or they can invest in government Bonds (G-Fund) which is backed by the US treasury and guarantees you will not not lose money, but you won’t make money either.
A rational move is to pretend you’re retiring in the next 6 months and everything hinges on what you have in the bank now. Keep it safe! Change your contribution to something less risk adverse, similar to the G-fund, while the world economy sorts itself out over the next couple of years, and then return to normal investing once the market sorts itself out.
Tip 2: Be prepared for job changes
Just as a diverse portfolio is quicker to recover, so too is a diverse group of people to whom you can reach out in times of economic downturn. While networking often sounds like a special circle of hell, reaching out to contacts at other companies and attending new conferences is part of a diverse and healthy plan to stay ahead of the game.
Keeping your resume updated and your skills sharp are other ways to maintain value in the inevitable bear market. While the economy is still growing, capitalize on education and professional development opportunities that are more easily available now.
If you have a recession sensitive employer, who has no problem kicking you to the curb, the moment things go south, then now is the time to turn up the hustle and figure out alternative ways to make more money.
Get Your Financial House In Order ASAP
Create a new financial habit called budgeting
Track your spending from this point on. Even the wealthiest of the wealthy live on a budget. A budget doesn’t mean living like you are broke.
Living on a budget gives you the power to forecast your spending (like a business). It allows you to see what every hard earned dollar you make is doing, and most importantly it allows you to put that money to work, like an entrepreneur.
There are smart apps that make budgeting easy. All of us here at Easy Investing Tips use a product called YNAB.
- Download and install YBAB (You need a budget) on your computer and smart phone. This simple to use budgeting software costs less than $50 per year and is worth every penny. This is one of the best ways to start tracking your money and you can’t help but save if you pay attention to what your money is doing.
Pay off your bad debt
Paying off any outstanding consumer debt and lowering your cost of living also help to bolster you against the coming recession. Most importantly, these free up more cash to add to your portfolio. If you have unsecured debt of $15k or more then give Lending Tree a call at 855-978-0819 for a free debt consultation.
Debt consolidation involves combining multiple unsecured debts into one bill, which can be helpful if you’re overwhelmed by an assortment of monthly payments. You can consolidate a variety of debts, including credit cards, payday and personal loans, utility bills, and medical expenses.
We definitely recommend tackling any outstanding debt problems, as soon as possible.
Capitalize On The Recession’s Opportunities
We tend only to see economic crashes in terms of their incredible losses: for example, the real estate market cost so many livelihoods in 2008 and it will happen again in 2019-2020, if you don’t take action to protect yourself.
But then again, lets assume that we have no debt, we’re not buying a new house or leasing a new car, and we don’t have any student loans to deal with, now what?
Remember that a recession comes with its own unique opportunities to earn money—and the savviest among us are unafraid to capitalize on them. Consider investing now in the few commodities that continue to grow in bear markets, so you’re already ahead when the recession inevitably hits. What’s a good investment right now?
At a current 52-week low, gold is one of these smart investments. Poised to rise when the economy turns down, it offers an emotional stability for anyone particularly concerned about sustaining economic stability in a downturn.
What will happen to the economy next?
At times, the economy’s supposed growth to pre-Recession highs can feel as unstable as ever, particularly as we watch prices continue to rise disproportionately to wages.
But a downturn doesn’t have to be negative or painful; with the right approach, you can feel confident that you are prepared—and, in turn, feel even better about your portfolio when again the pendulum swings the other way.
While you enjoy the current economic climate, stay ahead and make a plan to protect your future. If you can easily ride out the downturn, you’ll be ahead of the game whichever way the market turns.
After all, a bear is always chased by a bull.
You know what’s better than keeping your life savings, the money you worked so hard to earn over the years, safe, during a catastrophic stock market collapse? Taking that same money and investing it back into amazing companies with sound fundamentals at a 50% discount.