The tech-heavy U.S. Nasdaq entered a bullish market. You didn’t read it wrong. U.S. technology stocks, which lead the global stock market, rose 20% after entering the bear market in June, and now have entered the bear market rally and entered the bullish market at all.1. With the U.S. economy already technically in recession, and other countries likely to enter recession soon, it may seem a little strange. But what’s important is that the recession and the stock market are different. There is ample room for decoupling with each other in the short term.
Therefore, it is true that some countries are likely to experience recession at almost any time after the global financial crisis, but this should not be translated directly into the expected return on the stock market.
What is really important at a time like this is to establish a strategy that can overcome or even take advantage of short-term gains and losses while maintaining an exposure to the long-term growth and income flows that the stock market can provide.
Here are some ways to prepare for the uncertainty of stock market during recession:
- Invest first
Regular accumulation is a very strong strategy because it has a compounding effect that generates more capital gains and dividends by continuously reinvesting dividends.
Periodic savings plans are always a good idea, but most of all, they work best when the market is volatile. This is because lower prices increase the opportunity to buy more fund balances or stocks, and higher prices increase the opportunity to buy fewer fund balances or stocks.
If the economy is headed for a recession, there is a lot of speculation and uncertainty surrounding all the factors affecting inflation, interest rates, and stocks. As expectations for future events rise and fall, the stock market is very likely to go back and forth from one side to the other.
In this environment, investors who invest regularly need not worry. Even during that period, stock or fund balances accumulate, and the higher market volatility, the lower their average unit price.
