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How to manage Capital in an Economic DownturnThe Great Recession is not the first time that the economy has experienced downturn or recession. The last one occurred during the early 1980s, and it caused unemployment to spike and home prices to drop. However, that doesn’t mean that a similar situation cannot happen again. The effects of a recession have lasting implications for consumers and businesses. When consumers have less money to spend on goods and services, businesses must make adjustments in order to remain profitable. In fact, recessions can lead to innovation in industries like technology where creative minds come up with cheaper solutions for everyday problems. Here’s a look at how consumers are affected by recessions, what they’re doing about it, as well as how you can manage your money in these challenging times. What Happens When the Economy Recovers? When the economy recovers from a recession, there are typically two ways that consumers spend their money. One way is that consumers continue to spend on the same products and services that they bought before the recession. The other spending trend that occurs during a recovery is that consumers change the products and services that they spend money on. The reason for this change in spending habits is that consumers have changed their priorities during the recession. When a recession has caused consumers to have less disposable income, they tend to make their money go further. When consumers have less disposable income, they can no longer afford to spend money on certain products and services. The Impact of a Recession on Consumers A recession can have a lasting impact on consumers. Consumers who experience a recession tend to have less confidence in their ability to manage their money. This can cause lasting damage to their credit scores as they seek out lower interest loans or take out a repayment plan. A recession can also impact a consumer’s career and ability to earn a living wage. When a recession occurs, businesses have to make changes to remain profitable. This might include laying off employees or reducing the hours that part-time workers are scheduled for. A recession can impact consumers’ ability to buy a home as well. Mortgage rates tend to be higher during a recession as investors seek out higher returns because of the increased risk of default. Consumer Responses During a Recession When a recession occurs, consumers are likely to make changes to their spending habits in order to save money. The first thing that consumers are likely to do is reduce discretionary spending. Discretionary spending is the money that is spent on entertainment activities, eating out at restaurants, shopping for luxury items, and on travel. Another common response of consumers during a recession is to change how they get their services. When a recession occurs, consumers are likely to change how they get their banking, insurance , and healthcare services as well as how they pay their bills. How Consumers Can Manage Their Money in a Recession The best way for consumers to manage their money during a recession is to make a budget. A budget for spending should include all of the money that goes out of your bank account each month as well as how much money comes into your account. When making a budget, it is important to consider your expenses and income to see if there is any room in your budget to make changes. This can include looking at your monthly expenses and trying to reduce the amount that you spend on certain items. When you are making a budget, it is important to keep in mind that you will have to change it as time goes on. As your income changes, you may have more or less money available to spend each month. Likewise, you may also have more or less expenses to pay each month. Investing in the Stock Market: The stock market is one of the riskiest investments you can make. It’s also one of the most profitable when things go right. The stock market has its ups and downs, but it always rebounds in the long run. Even during a recession, savvy investors know how to make money in the stock market by investing in stocks and other types of securities. Investing in the stock market may seem intimidating at first, but it’s not as complicated as you think! In this Educational article, we’ll show you how to invest in the stock market if you have less than $5,000 to invest. With these tips and tricks to invest in a recession, you’ll be on your way to becoming a successful investor with an impressive portfolio sooner than you think! How to invest in the stock market with $5,000 Before you dive head first into the stock market, it’s important to know how much you have to invest. While the stock market can be rewarding, it’s also one of the riskiest investments you can make. Investing in the stock market is all about risk and reward — the more risk you take, the bigger your reward can be. Investing in the stock market requires at least $5,000 in order to diversify your portfolio. Diversification is key to long-term success in the stock market. Rather than putting all of your eggs in one basket, diversification allows you to spread your funds across many different investments. Diversification is key When you’re investing in the stock market, it’s important to diversify your portfolio. Diversification allows you to spread your funds across many different investments for two reasons: risk reduction and opportunity enhancement. Risk reduction is accomplished by not putting all of your funds into one investment. Instead, you’re spreading the funds across different types of investments. Opportunity enhancement allows you to take advantage of different types of growth opportunities. Understand why you’re investing Before you invest in the stock market, it’s important to understand why you’re investing in the first place. If you’re investing for growth, you’re looking for stocks that are currently undervalued to increase in value over time. If you’re investing for income, you’re looking for stocks that pay dividends. Take advantage of no-fee investments When you invest in the stock market, you pay fees for the management of your portfolio. Mutual funds and exchange-traded funds (ETFs) are mutual funds that are pre-packaged and purchased as a single unit. Mutual funds are professionally managed funds that are offered by financial institutions, whereas ETFs are professionally managed funds that are traded on a stock exchange. If you’re investing a small amount of money in the stock market, you’re better off choosing mutual funds or ETFs that have no or low management fees. Mutual funds and ETFs with no or low management fees are often referred to as no-load funds. Shorting ETFs can be profitable (This strategy is best suitable for Professional Traders) Shorting ETFs can be profitable if you’re investing a large amount of money in the stock market. Shorting ETFs allows you to profit from a declining market. Shorting ETFs is a very risky investment strategy and is not recommended for beginners. If you’re interested in shorting ETFs, be sure to talk to a financial advisor before making any investments. Additional Note: When the global economy is on the verge of recession, investors are scared and their first thought is to run towards things that are safe. In recent years, markets have grown to distrust risky investments such as stocks and other volatile assets. When the global economy is about to go into recession, commodities like gold and oil usually become hot properties for investors wanting to preserve their capital. There are a number of asset classes that thrive during a recession: real estate, bonds, and value stocks—or anything with a low correlation to the stock market. However, at the same time there are also some that suffer: high-beta stocks; growth stocks; growth real estate; luxury goods; emerging market equities; and anything else with a high correlation to the stock market. In our next article we will analyze Gold and Silver as an hedge against inflation and their performance in an economic downturn. Conclusion The recession that took place in the early 2000s is a great example of how a recession can change the way consumers spend their money. During this recession, consumers were likely to spend more money on food and clothing since those were necessities that consumers could not do without. When the next recession occurs, consumers may change their spending habits once again. However, it is important to remember that a recession is a natural part of the business cycle. It is likely that consumers will continue to spend their money in the future even in the face of a recession. Investing in the stock market is a smart way to diversify your investment portfolio. It’s also a great way to earn passive income through dividends. The best way to invest in the stock market if you have less than $5,000 to invest is through mutual funds or ETFs with no or low management fees. Shorting ETFs can also be a great way to make money in a recession if you have a large amount of funds to invest. Even though the technical definition of a recession has been changed/modified it is important to know that unemployment rate determines the condition of a recession.
SP:SPXEducation
by EQTSHARES
Will Canadian job data lift loonie?The Canadian dollar is in positive territory in the Friday session. Currently, USD/CAD is trading at 1.2619, down 0.34% on the day. Earlier in the day, the pair moved into 1.25-territory. It has been a busy week for the Canadian dollar, which started the week with strong losses but has partially recovered. The upward swing could continue on Friday, as Canada's job data for July is expected to show strong growth. The economy is projected to have created 100 thousand new jobs, while the unemployment rate is expected to fall to 7.3%, down from 7.5%. If the readings are within expectations, the Bank of Canada may consider scaling down its QE programme, which would be bullish for the Canadian dollar. The Bank of Canada opted to remain cautious at its policy meeting and did not make any moves. The message to the markets was dovish, with policy makers warning that a fourth wave of Covid-19 and continuing supply-chain issues could hurt the recovery. Still, the Bank said that it expected the economy to improve in the second half of 2021. In the US, inflation is one of the most important issues for the markets, which means that US inflation indicators are sure to find themselves under close scrutiny. The US will release the Producer Price Index (PPI) for August, with the consensus at 8.2%, compared to 7.8% in July. Inflation remains red-hot in the US, with the Federal Reserve stubbornly insisting that surge in transitory and that inflation will ease. If we continue to see inflation rising in the final months of 2021, investors will become more sceptical of the Fed's stance, and policymakers may have to adjust monetary policy in order to curb inflation, which is well above the Fed's target of 2%. On the upside, there is resistance at 1.2719. This is followed by resistance at 1.2785. USD/CAD is testing support at 1.2625. Below, there is support at  1.2465
by OANDA