Archive forEconomic Analysis

Smart Investing Principles

Whether we’re in the throes of a recession or not, it’s always wise to keep up smart investing principles—it’s the best way to grow wealth over the long term, after all. In addition to staying invested, keeping your portfolio diversified, and reinvesting dividends (which Acorns does for you), try and keep your timeline in mind.

Keep a long-term perspective

If you’re a long way out from retirement, market turbulence in the short term shouldn’t cause you too much stress. History shows that they’re perfectly normal parts of the economic cycle, and things tend to bounce back. After the Great Recession, it took roughly four years for the Dow Jones Industrial Average to eventually hit a new high. But here’s a little secret: long-term investors who stuck with it were the ones who were positioned to net the greatest gains.

Consider your goals

Your goals play a big part in your investing habits, as well. If you’re saving for your kids’ education, for example, a 529 plan is usually your best bet. And while a regular brokerage account is a great place to grow your wealth slowly to fund long-term goals, saving for retirement in a 401(k) and/or Traditional or Roth IRA will open up tax breaks you can’t find anywhere else.

When all is said and done, a recession shouldn’t really affect your long-term investing plan all that much. The trick is to keep your emotions in check and, if possible, invest even more during market downturns. A well-thought-out investment plan is one that’s built to withstand market volatility and slumps, which is an inherent part of investing.

Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. This information is being provided for informational purposes only, and is not intended to provide, and should not be relied on, for accounting, legal or tax advice. You should consult your tax or legal adviser regarding such matters.

(This article written by: Marianne Hayes)

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Investing Strategies for a Recession

Consider dividend-producing stocks

In addition to dialing up your retirement contributions, a recession is also a great time to leverage different investing strategies. If guaranteed income is a priority, and for many it is, look to dividend-producing stocks. Some companies pay out periodic earnings to shareholders called dividends. This is on top of regular earnings. During a down market, these types of stocks could position you to continue to earn money, despite volatility. (And if you can reinvest them, all the better.) According to Siblis Research Ltd, the average dividend payment for U.S. stocks at the end of 2019 was 1.8 percent of the original investment.

Research which sectors are poised to grow

Another thing to think about are the sectors that are poised to stay active during and after the recovery. While this is impossible to predict with certainty, data shows some sectors have grown in this stay-at-home economy like e-commerce, food delivery, telecommuting services and the like. Healthcare services, particularly ones with remote capabilities like telemedicine, could be another sector that sees growth during the economic turnaround.

Invest in a diverse mix of stocks

Investing in a variety of industries should serve you when it comes to keeping your portfolio diversified, which helps mitigate risk. Going with exchange-traded funds (ETFs) and low-cost index funds, which can include hundreds of different stocks, also provide the opportunity to diversify and balance risk so you’re more likely to benefit from the eventual market recovery.

(This article written by: Marianne Hayes)

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Investing During A Recession

This may feel counterintuitive, but a down market is actually one of the best times to invest because we generally see a drop in asset prices. That means stocks, bonds and mutual funds are likely cheaper than they are during a bull market. In other words, stocks are essentially on sale right now and prices are dropping in kind.

Take advantage of dollar-cost averaging

Experts agree that one of the easiest ways to take advantage of this is to leverage a strategy called dollar-cost averaging. All this means is investing on a schedule and sticking to it, regardless of market ups and downs. If you have a 401(k), you’re already doing this. (If you’re an Acorns investor, you’re also doing this if you have Round-Ups or Recurring Investments enabled.)

Now is the time to continue kicking into your retirement funds and other investment accounts—even upping your contributions if possible. Staying committed over the long term and locking in these investments with automatic contributions means that you’ll be able to take advantage of future dips in the market when they eventually come, and you won’t be spooked into pulling out during periodic downturns.

Just keep in mind that investing now means that you’ll have to wait until the market kicks back up to realize future returns.

Maintain sufficient savings

Maintaining a healthy savings account is critical to your investment plan and overall financial health, too. As we hinted at earlier, one of the major reasons behind the massive sell-off we’re seeing in the market right now is that many people need cash now. One in four Americans have either lost their job or experienced a pay cut because of the coronavirus shutdown, according to a recent CNBC survey. For many, selling stocks at a loss is their best worst option.

This pandemic is underscoring just how important it is to have cash reserves on hand should disaster strike. Most experts suggest stocking up your emergency fund with three to six months’ worth of expenses. The idea is to keep this money in a bank account so that you’re able to access it quickly if you’re financially strapped. A high-yield online savings account is a great option in terms of earning the most on interest.

(This article written by: Marianne Hayes)

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How to Invest in a Recession

The most important thing to remember about markets is that they have always recovered, despite the severity of past downturns. That’s why it’s vital to take a long-term view, rather than dwell on today’s stomach-churning ups and downs.

In addition, you want to avoid locking in losses by selling when your portfolio is at a low point. By maintaining your investment discipline, you can allow yourself to be in a position to profit from a market rebound. After all, market drops represent the “buy low” part of the tried-and-true “buy low, sell high” investment ideal.

It’s always wise to maintain a diversified portfolio, by making investments in different asset classes, and that is especially great advice in an uncertain market. Investing in mutual funds and exchange-traded funds (ETFs) is one way to gain access to a broad array of investment products. (For example, Acorns portfolios include a mix of ETFs offering exposure to thousands of stocks and bonds.)

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Saving Money in a Recession

While we can all look forward to emerging on the other side, there is likely to be additional short-term pain attached to this recession, so bolstering your emergency savings is a wise step right now.

Take a look at your budget over the past few weeks to identify areas where you’ve experienced unexpected savings, such as commuting expenses, clothing, personal services and almost certainly travel and entertainment. If your situation allows, take those savings and sock them away into a high-yield savings account to help protect your finances in case of a job loss. Or, if you already have adequate savings, consider investing that money.

The best way to navigate these tough times is to focus on the bright spots you can find today. Identify ways to maximize opportunities that align with your own personal circumstances, time horizon and financial goals and set yourself up for success as we eventually emerge from this tunnel.

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What Industries are Historically Recession Proof?

As mentioned, not everyone feels the pain equally in a recession, and some industries and jobs are better positioned than others to survive this unprecedented economic situation and even thrive. It’s important to note that the 2020 recession is different from previous ones like the Great Recession of 2008 because of the nature of its abrupt onset and the shelter-in-place rules that followed the coronavirus pandemic and have wiped out traditional commerce.

Therefore, no one can precisely predict the impact on specific sectors. But there are some industries that are traditionally recession proof given their “defensive nature.” In other words, they offer more conservative products and services that people tend to seek no matter what the circumstances. Those can be good places to look for jobs and/or park your investments if you’re looking for individual stocks. Here are a few to consider.

Consumer packaged goods (CPG)

While Americans’ wallets have been walloped, they still need consumer staples, and there have been a number of CPG companies that have flourished as consumers stock up on basics and return to the comfort of brands and products they trust. That could spell good news for large, established companies that sell products that consumers continue to buy in a downturn and pandemic, from food to cleaning products to, yes, toilet paper.

Health and beauty products

While these often fall under the umbrella of CPG, it’s likely to be a stand-out industry in its own right. Companies that make affordable luxuries tend to prosper in a downturn, given that consumers still want to feel good about themselves, even if they can’t spend the big bucks. So this sector tends to be recession resilient.


If you’re job hunting, government jobs usually provide resilient opportunities. They aren’t entirely immune, especially as municipal revenues plunge. However, statistically, these are relatively safe and the government sector encompasses a wide swath of jobs of all types and levels. In fact, almost any job that one would do in the private sector has a counterpart in the government. While salaries might not quite match up, you might find more job security pursuing your existing job in a governmental capacity.


With elective procedures on hold, some healthcare jobs may have been lost, but that should even out as governments lift those orders. Healthcare jobs are typically spared in a recession—from home health aides to physical therapists. And of course the healthcare industry can be a great place to invest, especially in sectors like life sciences that are helping develop tests, vaccines and pharmaceuticals.


Construction jobs are largely insulated, although that could change if the real estate sector continues to dip. But, other positions that should withstand most crises are those related to necessary infrastructure-related functions, such as plumbers and electricians.


Computer- and technology-related jobs are likely to hold steady. Look for jobs in areas that support vital business activity, such as a computer support specialist, programmer or information security analyst, and investments that provide necessary hardware and software.


You may initially scoff, but while brick-and-mortar stores, particularly in malls, have been decimated, there are other areas that are thriving. Grocery stores have seen an uptick in jobs and sales, as have big-box stores. In a recession, discount outlets and DIY-focused stores should continue to do well as thrifty consumers reel in their spending. And large e-commerce players that sell basic goods and at-home products are doing particularly well.

Pet products

Fur babies rarely get short shrift, even if consumers are economizing in other areas. That means in addition to affection, they are likely to continue getting lavished with treats, toys, top-notch medical care, even gourmet food.

(This article written by: Cathie Ericson)

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What can I do to prepare for a recession?

Is a recession imminent? Well, we haven’t experienced two quarters of economic contraction yet, but it certainly appears that we’ve entered recession territory. Indeed, Goldman Sachs, JPMorgan Chase, Bank of America and others say the U.S. is already in a recession and predict GDP will be down for the first and second quarters of this year.

So, what can you do? The best strategy is to maintain sound financial habits that you should adhere to all year long, such as carefully budgeting and watching spending, building an emergency fund and saving aggressively. (And if you don’t already do these things, there’s no time like the present to start cultivating these habits!)

Here are three additional suggestions:

1. Don’t panic, but be cautious

This is the time to be more mindful than ever about your spending. Focus on covering the essentials and look at what purchases you can put off or skip entirely, so that you can shore up your savings in case you do lose your income. With travel on hold, and many bars and restaurants closed except for take-out, there are opportunities to trim spending in those categories. You can also save by buying key items—like paper goods and pantry items—in bulk.

2. Have a back-up plan

What would happen if you lost your job? Do you have a skill that you could put to use in a side gig? And could you start using it today to improve your marketability and/or build up an extra cushion in your emergency fund? Being prepared is always the best antidote to a surprise job misfortune.

3. Consider bolstering cash reserves

In addition to bulking up your emergency fund, you might want to have an extra stash of cash on hand so that you don’t have to sell stocks when they’re down or incur penalties by taking funds out of your retirement accounts to stay afloat if you hit rough water.

It’s natural to be fearful in the face of a recession. But taking steps now to safeguard your finances can help keep you on more solid financial footing.

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What’s the impact of a recession?

An economic downturn can be devastating for both business and personal lives, and of course, the two are intertwined.

Say a company makes widgets, and starts seeing its sales and profits decline. It will likely decide to make fewer widgets, which means it needs fewer employees running the assembly line and selling the widgets to stores. From there, the effects ripple to many tangential businesses adjacent to the primary widget-maker. If they are manufacturing fewer widgets, they need less machinery, so it affects the machine makers and repair people. Retailers have fewer widgets on their shelves, so their sales decline. And the widget-maker might decide that it doesn’t want to start a second line of widgets after all, so it stops investing in research, design and marketing.

The livelihoods of all those associated employees are then affected, which can shake their confidence. They, in turn, buy less of other companies’ widgets, and all the widget-makers are suddenly in the soup. People are also less inclined to dine out, travel, upgrade their homes, etc. They might even stop paying their bills, causing even further distress for providers of goods and series. It’s easy to see how the cycle feeds on itself. As everyone pulls back, a recession begins.

As this spending decline deepens, the stock market is likely to fall since companies are making and selling fewer widgets. Consumers might lose their jobs, or have their hours or wages reduced. At that point, they can have trouble paying their bills, which leads to credit troubles, and in extreme cases, bankruptcy.

We’re seeing some of these effects already as a result of the coronavirus outbreak. Businesses are shutting down (some temporarily), millions of workers are being laid off from full-time work or losing contract work. So they have less money to spend and may also have trouble covering their bills. The government has been stepping in to try to mitigate the effects with a $2-trillion stimulus plan that would send cash payments to Americans, create a fund to lend to small businesses, and increase (and expand eligibility for) unemployment benefits.

What’s the average length of a recession?

The good news (if we can call it that) is that on average, a recession lasts about 11 months, says the NBER. But they can be shorter and milder, or longer and more severe, as we know from the Great Recession of 2008, or even catastrophic, like the Great Depression of 1929.

But when considering history as a whole, we can assume the next recession will be of the milder and shorter variety.

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What causes a recession?

While the signals cited above can set off those warning bells, they don’t actually cause a recession. It’s often the following economic situations that can precipitate a recession:

Inflation/deflation cycle

When the cost of goods and services rise, this is known as “inflation.” These rising prices mean that consumers have to spend more of their money to buy the same things they did before, and can lead to spending cutbacks as they aim to stretch their budgets. But then deflation can occur, which reduces the value of things and can cause consumers to wonder where the bottom is. They stop spending while they wait, which leads to a decrease in demand, which means companies need fewer people to produce their goods and services. Fortunately, the Federal Reserve Board is on the job, tweaking interest rates in an effort to sustain equilibrium.

An asset bubble

What happens when you blow a bubble and it gets too big? It pops. All at once. That’s what can happen when consumers are too enthusiastically snapping up a certain item—such as real estate or stocks—expecting it to keep expanding, as in getting more valuable. When it becomes clear that specific asset isn’t going to continue to rise in price, a huge sell-off can follow—think a stock market crash or plummet in the housing market. The ripple effect is that the whole stock of that “item” is effectively devalued, which can send the economy into a recession.

Loss of consumer confidence

When consumers are worried about their economic future—their job seems uncertain or their investments have lost value—they tend to go into hibernation mode and stop spending. Of course, when consumers stop spending, businesses need to produce fewer goods and services. So they employ fewer people, making everyone feel less secure about their jobs. And the cycle continues.

Slowing manufacturing

One closely watched report is the Institute for Supply Management’s “Report on Business” that tracks elements such as new orders, production, inventory, supplier deliveries and prices. As mentioned above, keeping the machine of industry humming is a key factor of a healthy economy so it can be worrisome when things slow.


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What Is A Recession?

While recessions are hard to quantify, typically economists peg a recession as two or more consecutive quarters of a negative growth rate of gross domestic product (GDP)—which is the total value of everything that the country produces, as assessed by the Bureau of Economic Analysis (BEA).

That can be an easy, measurable way to determine if you’re in a recession—which is why it’s a popular definition. However, the National Bureau of Economic Research (NBER) chooses to be a bit less precise and more inclusive of various economic factors. It defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in GDP, real income, employment, industrial production and wholesale-retail sales.”

This is what we began to see in March 2020, in large part as a result of the coronavirus outbreak.

What to look for: the signals of a recession

Here are some of the indicators that raise warning bells a recession might be imminent:


As mentioned, for some, this is “the” number, but it should just be one closely watched number among many as an indicator that the economy is wavering.

Yield curve

The “inverted yield curve” was the metric that threw everyone into a panic in 2019. It sounds very economist-y but a “yield” is just the interest rate on a bond. Typically the yield curve slopes up, indicating that investors want a higher interest rate on bonds they are holding for a longer time. But when it “inverts,” it indicates that investors are asking for a higher interest rate on shorter-term bonds, which means that they are feeling more confident about the long term than the short term. Historically, this inverted yield curve has come before a recession.

Employment data

The Department of Labor publishes a monthly report on the job market, which summarizes factors such as how many jobs were created in each sector, what percentage of the population was unemployed and how many hours were worked, both full-time and part-time. This last part is important because when businesses are worried, they are more apt to hire part-time labor and are liable to cut hours.

In the wake of the coronovirus outbreak, thousands of businesses were forced to shut down, at least temporarily. Unemployment claims surged as a result, and economists predict that the March jobs report will reflect that.

Confidence level

While economics appears to be cold, hard math, it’s also influenced by how people are feeling. There are a number of organizations that take a pulse on current sentiment, including The Conference Board, University of Michigan and the National Federation of Independent Businesses. When consumers feel unsteady, they are apt to pull back their spending, which causes sales to fall.

Leading Economic Index

The Leading Economic Index, another report from The Conference Board, is comprised of 10 components that include jobs data, building permits, stock prices and manufacturer orders, among other factors, to indicate how healthy the economy is and how buoyant businesses feel.



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