Economic Recession 2023: What is it? What should an investor do?

In this blog, we will cover in detail what is an economic recession 2023 and what an investor should do during this time. So let’s start without wasting time.

We all have heard the term ‘Recession‘. We have come to know about the Italian recession during our academic life. Almost everybody among you, the readers, is familiar with the term. But, some of us are unaware of the meaning of ‘Recession.’

A recession means a major & noticeable change in the social system, typically within a short span of time. Though, the ‘Recession’ plot takes quite a few years to prepare. Much like the saying – it takes a long time to prepare; it all happens at once.

An economic recession is much like a normal ‘Recession,‘ but its central idea is regarding the economy – which means that every change that will occur during the recession is directly or indirectly linked to the economy. An economic recession may affect other things, but every change will be caused due to economic fluctuation.

Like any other social recession, the plot of an economic recession takes a long time to create. This also brings many financial factors to consider. The recession can also happen during a short time (for example, a few weeks to a few months), but in certain cases, it can last up to months.

In an economic recession, the effects are seen immediately. These kinds of injuries to the economy take a long time to heal. The worse the economic condition gets, the more time it takes for the economy to recover. In the worst case, the effect of an economic recession may be years long.

The last economic recession was in 2020 – during the COVID – 19 epidemic. It took place in March 2020 and probably lasted for 2/3 months. This was probably one of the biggest economic disasters, which finally turned out to be a recession. All of a sudden sharp fall after some year-long economic progression led to the fall in the US. The national reasons were lockdown, overnight unemployment of thousands of employees, labor, an unfamiliar situation of fear, etc.

While the Covid-19 economy happened almost overnight, some experts fear that we may undergo another recession in the upcoming days.

What’s The Reason Behind The Upcoming Economic Recession 2023?

After the Covid-19 pandemic, the global supply & distribution chain has not shown recovery. The Fed had printed too many currencies and has been hiking the interest rate for the past few months.
The main indication behind an upcoming recession is the unexpected slowdown in the GDP.

The GPD has been shirking for the past two subsequent quarters, and it’s the reason experts are predicting that we may undergo an upcoming recession.

The Economic Recession 2023 From an Investor’s Point Of View:

Now we will be discussing what an individual or a retail investor (especially a stock market investor / an equity investor) should do in case of a recession.
In the upcoming lines, we will be considering several cases, like–

1. What should an investor do if he is already invested and has no money?
2. What an investor should do if they are not already invested and has money in hand?

The current condition:

We all have seen that after the Covid-19 pandemic period stock prices have risen as sharply (or probably more) as they have fallen during the Covid-19 market crash.

Much like that, we have seen that stock prices are continuously falling for a few months. Many stocks are trading 20-40% below their all-time high. Some companies have touched their 52-week low. The stock price of giant & well-known companies like Netflix had dropped by 75%!

In the last month, many stocks have seen a positive recovery. The indices had also moved higher.
Though most companies had seen a recovery, the IT sector was not in the mood to recover. NASDAQ, the index has been continuously falling. It has fallen about 33% (to date of writing the article) from its level of year opening.

But since the past few days, stocks price have again started falling badly. Many investors are worried about what they should do in a bear market. Now we are going to discuss the same.

Let’s answer the first question:

1. What should an investor do if they are already invested and have no money?

If you are already invested in the market, you might worry about your wealth as your portfolio might be in red in the current situation.

Remember that the recession, if it really happens, hasn’t started yet. It is yet a long way to go. So if you are in a panic because your portfolio is 5/10% down, there is much more to happen in the upcoming days.

So what should you do?

Should you book all the losses and pull up your investment from the market?

Definitely not – at least, this is what experts suggest. If you have invested in quality companies with strong fundamentals, good balance sheets, and future potential, don’t panic. But if you have made your investment in companies that do not have a strong fundamentals, it’s better not to stay invested in these kinds of companies during a strong volatile market.

As you have no money in hand – because you have invested all your money in the market, sit & watch where the market goes.

2. What an investor should do if they are not already invested and has money in hand?

But, in case you have not already invested your capital in the market, don’t invest your capital at once in the market. Instead, the best practice would be to do a systematic investment plan or SIP in the market, whether in equity or mutual funds.

As we were talking about, this is just the start of a probable recession. The main problem is that we do not know when it will start or stop. That’s why it’s tough to catch the bottom price of a stock. This is where many invest in the trap – many of us do lump sum investments in the market, thinking a certain price to be the lowest price stock can go, but the stock goes even more down. So the best practice will be to continue a SIP in the bear and bull markets.

However, the amount of investment should definitely vary – if it is a bear market, your investment amount for SIP should be greater than what you would be investing in a bull market.

Conclusion

So this article was all about the economic recession 2023 we may undergo in the upcoming days. In this article, we have learned what a social & and economic recession is, what an investor should do during an economic recession, etc. We hope that you have understood the main idea of an economic recession. If something is still unclear to you regarding the economic recession, you may ask us that in the comments.

If you are an investor, we recommend you not pull off your capital, and have faith in the company you are invested in.

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Sunil Kumar

I am a well-skilled experience Stock Marketer and Investor. I have good knowledge of the stock market and investment. I have completed Bachelors in Finance And Investment from the University of Virginia (US).

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