It seems we are only just properly over the effects of the financial crisis, and now the papers are full of warnings about a global recession.
But are we really heading for another downturn – what does it mean for your money – and how can Continuum help?
What is a recession?
A recession is defined as a decline in GDP, income, employment, industrial production, and sales.
It can be painful for all concerned, with worries about jobs and the future. In the UK, we have seen a contraction in GDP over the last three months. If the next three months show another shrinkage, we would technically be in recession.
These economic woes could be simply the fear of Brexit, and as new Chancellor Sajid Javid is keen to point out, the underlying UK economy is actually healthy, with plenty of employment and reasons for confidence.
But some doomsayers are predicting a global recession.
Watch the markets
These dire predictions are based on a phenomenon known as yield curve inversion, relating to the yield or payment available from bonds.
An inverted yield curve occurs when markets demand higher interest rates for loaning a country money in the short term than they will over the long term. When short term rates are high, it suggests a lack of confidence in that country’s short-term economic health. The last seven recessions in the US were all preceded by an inverted yield curve.
In the US the yield or return from 2-year US government bonds became higher than that from US 10 year bonds. In the UK, returns from 2-year government bonds have started to exceed those of 5 year bonds.
It looks as though professionals in the bond markets are predicting a difficult spell ahead.
So, is a recession on the way?
Things may not be as grim as they appear. This yield curve inversion may not be a harbinger of doom – but a reaction to the US Federal Reserve raising short term interest rates in 2018 to lessen inflationary pressures – which many observers believe was premature.
It has put interest rates back down – reducing the pressures on the bond market, and possibly reducing the risk of recession.
The global economy may be slowing down after a long period of steady growth, but recession could potentially be avoided. The change of heart by the Fed may be one piece of good news. Any progress on resolving America’s trade wars would be another.
You have access to Continuum’s expertise behind your financial plans if there is going to be a recession – and if there isn’t.
How can we help?
Fluctuations in the economy come and go as part of the natural cycle – and a short downturn is often solved by financial easing from central banks.
But a recession (if it comes) can still be damaging for your wealth – especially if you don’t know exactly what is going on. Fortunately, at Continuum, there is a lot we can do to help. You can keep up with the latest financial news with our weekly education mailer, and keep track of your portfolio with our Personal Finance Portal .– giving you access to view all of your financial arrangements in one place 24/7.
Even more important, you can have a financial adviser to call on to give expert advice with your investments. If you are worried about a particular stock or sector, or if you want to review your entire investment approach he or she can help. It could be the ideal opportunity to review your investment strategy and ensure your portfolio is suitable for volatile times, with broad diversification. Their knowledge could also help you see where opportunities may lie.
Getting help with your money, and avoiding your own personal recession, is easier when our experts are working with you. Why not call us today?
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.