What is a recession?
A recession is when a country's GDP (Gross Domestic Product) declines for two or more successive quarters.
Gross Domestic Product declines for two or more successive quarters.
Are we headed there?
Well, it is not all or nothing where a recession is concerned. You can have a light recession or a severe one. I think this one may be light. It is a rough patch. Do not be afraid of the word "recession". It is true, there are not a lot of companies hiring right now and certainly not a lot of growth, but things can turn around.A recession can be light or severe This one may just be a rough patch
What can I do if I think I may be in jeopardy of losing my job?
Create liquidity. Apply for a home equity loan while you are still earning a paycheck. Do not max out your credit cards. Make sure you leave room on them for emergencies. Most importantly, do not take on more debt. On a positive note, according to Smart Money magazine, the number of Americans that filed unemployment claims fell to its lowest level in four months.
- Create liquidity Do not max out credit cards Do not take on more debt
How about people that cannot pay their mortgage, car loans or other large bills?
According to The Mortgage Bankers Association, the 3rd quarter of last year had record high levels of late mortgage payments and foreclosures. The most important action you can take is to contact the lenders before they contact you. Be upfront and tell the lender you are struggling and try to negotiate a lower monthly payment. They are more likely to be understanding of your situation if you reach out to them first and explain. Also, it may be time to take a good look at your budget. Maybe you need to reassess what you can and cannot afford.
- Contact lenders before they contact you Negotiate lower monthly payments Reevaluate your budget
Any advice for those who are still in a position to invest?
Now more than ever is the time to be contrarian. Look for those stocks that have been beaten up recently. Recessions do not wipe out industries, they wipe out the weakest companies in the industry. This recession is being lead by problems in the financial services industry. Look for good banks and financial services companies that you like; then do your homework. Do they have good balance sheets? Are they companies that you think will be winners?
- Be contrarian Recessions wipe out weak companies, not entire industries Do your homework ? look for companies with good balance sheets
More information, visit aerialmutualfunds.com.
Jason Tyler, Senior Vice President, Ariel Capital Management
Jason Tyler is Senior Vice President and a member of the Investment Committee at Ariel Mutual Funds. Jason has worked in financial services for almost 15 years.