facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
The "R" Word - Recession Thumbnail

The "R" Word - Recession

Investing Stock Market Bear Market Inflation Interest Rates

There has been a lot of talk in the media about a recession.  Today on Wealth Wednesday our financial advisors will discuss:

  • Defining a recession
  • Inverted yield curve
  • Are we in a recession?
  • Have stocks already priced in a recession?
  • Is this something to cause concern?

That and we introduce a new member of our team, Vince McManus

Watch now: The "R" Word - Recession


  • 0:00 – Intro
  • 0:31 – Next week, we broadcast live, please send us your questions.
  • 0:52 – Meet the newest member of our team, Vince McManus
  • 3:00 – Defining a recession
  • 4:37 – The “canary in the coal mine:” An inverted yield curve
  • 6:19 – Are we already in a recession?
  • 8:03 – Have stocks priced in a recession?
  • 9:52 – Is a recession something that should concern investors?
  • 12:14 – Final Thoughts
  • 13:52 – Outro


Join Us on August 17 at 12:00

Wealth Wednesday, Live

We will be answering your questions. Click on the button to submit a question we can answer on the air.  And be sure to join us for this special live broadcast.


Send Your Question

Ask Now


 What is a Recession?

A common and basic definition of a recession is two declining quarters of Gross Domestic Product (GDP).  GDP is the value of what a country produces.  But it is actually more complicated than that.  In general, it is a prolonged period of declining activity.   The National Bureau of Economic Research determines when a recession officially begins and when it ends.   Often it is over before we know if we are in a recession.

 

The canary in the coal mine – an inverted yield curve

Bonds with longer maturities should have higher yields than those that mature sooner.  There is more risk associated with a 10-year or 20-year bond than there is with a 2-year note. And as such investors often demand to be paid more for the risks they take.

But there are times when the opposite holds true.  When the federal reserve raises rates aggressively, the yield for short-term bonds can be more than the longer-term yields.  This is called an inverted yield curve.

Many economists use this to indicate a recession is on the horizon.  The most popular relationship is the yield on 2-year treasuries compared to the 10-year bonds.  

 

Are we currently in a recession?

It depends on who you ask.  There is a lot of noise about whether the recession has already begun or not.  But from a purely academic standpoint, the recession probably has not yet started.  But many experts believe we will see one in the next 12 to 18 months.  How bad it is, nobody knows.

Have stocks priced this in?

The stock market tends to be forward-looking.  It also tends to reflect all available information in the prices.  To some degree, a recession has already been priced into the market.  But there are still some other risks that could impact your accounts.  

Should investors be concerned?

Recessions are a normal part of the economic cycle.  We see the economy go from boom to bust, and back to boom.  There can be some short-term pain associated with a recession, but they tend to be a minor disruption to a longer-term growth trend.  

 Younger investors with a longer horizon can often look at this as a buying opportunity.  For investors closer to retirement, it reminds us that a strong plan helps us consider the investment risks we always face.

 

Appearing in this video

Andy Dollman

Andy is a financial consultant in our Parkersburg office.  Andy joined Commonwealth in 2018.

Vince McManus

Vince is the newest financial advisor on our team.  Vince has been a financial advisor for over 6 years and is located in our Parkersburg and Athens offices.

Neal Watson, CFP®

Neal has been a Certified Financial Planner™ Pro for more than two decades.   He operates in our Marietta office.

Join Us on August 17 at 12:00

Wealth Wednesday, Live

We will be answering your questions. Click on the button to submit a question we can answer on the air.  And be sure to join us for this special live broadcast.


Send Your Question

Ask Now