A smooth business cycle is the key for steady investment performances. In case of a recession,there could be some panicked moves throughout the marketplace. Hence, the investors essentially need to stay updated about the latest trends in the
business and economic cycle. By doing so, they can at least always be ready for
swift portfolio allocations.
Nevertheless, it is not easy for anyone to get all the latest updates just like that. It requires brainstorming and critical analysis of the current market trends to predict a recession well before time, which is, indeed, very difficult. But for those who
have are well-aware about the historical trends, predicting economy recessions
earlier is quite easy. All they should keenly focus on are the signs of the
next economy recession in the years to
Most 5 Notable Signs Of The Next Economy Recession
For those who have a keen eye on the daily economic trends,
a few signs of the market scenario suffice to hint them to towards the next
recession. Though different analysts consider
different signs and have different priority levels for them, yet, a few
of these signs turn out to be common factors in every observations. So, here we list out the 5 most important signs that indicate an economy recession.
1. Rapid Increase in Oil Prices
Almost every other day, we see a change in the oil prices.
Sometimes, the change is a minor one, whereas,some other times, there is a sudden rise in the prices. (Just wondering, if we could see an immediate drop too? Umm,
For us, as a layman, this rise in oil prices could just mean paying more at a fuel station. But, on an economic level, persistent high rate percentages clearly are a sign of economy
recession. Obviously, people in general, and in the US in particular, tend to step
back from such expenses that cause a blow to their budget. We have already seen
such instances in the past in US where oil shocks resulted in recessions.
2. Paying Loans Becomes A Problem
A rapid increase in crime rate is generally linked with large debts and credit build-up. It becomes a problem for a vast majority of the people to pay back their loans. This is yet another indication towards an economic recession. Sometimes, it is because of a recession that the crime rates increase drastically. In either case, regardless of whichever of the two factors serves as a cause, what we are concerned with over here is that recession and crime rate have a direct linkage.
If we look at the history, then the last three decades show a drastic increase in the delinquencies together with recessions. Gladly, today, the rate of delinquency is not as high
as it used to be in the past. Yet, we need to stay cautious of it.
3. Rapid Stock Market Crashes
Another key indicator towards a future recession – stock market crashes. Since people invest their money enthusiastically in stock market shares, any crashes literally
shatter their confidence. The loss with which they suffer makes them reluctant
to spend again. Such a trend, if continues, can further lead to subsequent crashes and more bear markets.
Presently, it is high time to monitor the economic position, particularly in the US, since the next bear market is predicted to be a devastating
one by a Veteran investor.
4. Increased Rates Of Interest
High interest rates drastically ruin our weakened financial condition. At the same time, they clearly hint towards an upcoming recession. Wondering how?
Well, this is a bit tricky part and might be confusing for most of you. To make
it simple, the interest rates actually base on the “natural interest rate” concept of economics. If the interest rates become too high, they tend to go above the natural interest rates. Hence, they lead to an economy recession.
5. Declining Unemployment Rates
Though you might consider it as good news, as a matter of fact, falling unemployment rates actually indicate a future recession. These two concepts are not directly linked to each other; rather, they have an indirect effect.
When there are more job opportunities, and employee turnover, it results in a decline in the rate of unemployment. To some extent, this is acceptable, but, when the rates
drop too low, the Fed’s become worried about possible inflation take off. Hence, they tend to increase the interest rates that lead to a recession.