Recessions Are Scary, But They Don’t Have to Be
If you turn on your news app of choice, you’re going to be bombarded with headlines about job losses, stock prices falling, and the latest on the COVID-19 pandemic. Due to the historic projected decline in economic growth and rising jobless claims, it’s difficult to see how the current economic climate would not result in a recession. While there remains great uncertainty and worry about COVID-19 and its impact, it’s important for long-term investors to remember that recessions and bear markets are inevitable phases within recurring economic and financial market cycles.
One of the fund managers we use, Dimensional Fund Advisors, has a post that is helpful in putting recessions into context for long-term investors. In one of their latest blog posts, they discuss how over the past century there have been 15 recessions in the U.S. and in 11 instances, stock returns were positive two years after the recessions began. For a long-term investor who is worried about their retirement savings, this should be good news. You can find a link to the post below.
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