The Biggest Losers During a Recession
How to stay afloat when it all goes down
We are undoubtedly halfway into a recession. So it got me thinking…
What were the biggest losers during the last recession— and which assets, if any, provide the most safety during a recession?
In 2007/2008 we saw that:
The S&P 500 index went down over 40%
House prices fell almost 10%
The NASDAQ index went down over 40%
Gold fell almost 20%
Long-term speculative treasury bonds went up by as much as 20%
Bitcoin was created in 2009, so crypto doesn’t count.
So it seems like 30-year US treasury bonds are a ‘safe’ bet. However, the current yield as of May 2022, is 2.99%.
It doesn’t even outpace inflation, which is at 8.5% currently.
That means those bonds are currently losing value. Not to mention, your money will be illiquid for 30 years, meaning you won’t be able to spend it.
Cash is Not King Anymore
The phrase “cash is king” used to be true.
However, the dollar itself has been debased too much. A dollar is worth over 90% less today than it was in 1913.
Graph below, courtesy of VisualCapitalist.com
TOP TIP: When inflation is higher than your bank’s interest rate, leaving cash in your account means it will be slowly losing value.
What am I doing about it?
I believe top investors like Ray Dalio, Kevin O’Leary, Peter Schiff and Raoul Pal are correct. Productivity is key.
This could be as literal as just having a job. Your productivity is the skills you use to do your job — and keep getting paid throughout any recession.
As for asset classes, it looks like the majority of us are just getting wiped out, and the only safe haven is ‘time’.
Waiting the time it takes for everything to turn around again, which it always does… And just keep DCA’ing (dollar-cost averaging) into your chosen asset classes to take advantage of the low prices.