Trade The Journey

Trade The Journey

When is a dip, a recession?

If you are knowledgeable about economic indicators available to you, then you probably have warning signals that emerge that will help you make a move when needed. The key to surviving a recession is knowing how to move your assets among the different markets to avoid losses. Most people move their available money, assets and liquidity to a safe haven and try to lock in rates in the bond market to maintain a sort of return on their money.

As money moves out of the economy, things begin to get tight and most people use this an opportunity to restructure their repayments as the economy tanks. Or perhaps to purchase assets that have hit the market undervalued. But when are we heading for a recession and when we are experiencing a temporary downturn?

So I ask when is a dip a recession? There are three factors to look at when assessing the economy.

Duration: The longer the weakness or the downturn continues, the deeper it gets.

Depth: The more widespread the downturn becomes, the more likely a recession will occur.

Diffusion: How widespread a particular business cycle movement (Expansion or Contraction) has become. Is the panic venturing across different industries? Where exactly did the 2008 recession begin? and how many industries the recession affect? Issues of liquidity in the commercial paper market trigger issues in the shadow company/assets banks had and then trickle down to the housing market.

Here are some charts that I have created to help you visualize the data:

 

 

Recession from 2008 not included. Hopefully these graphs will you give some starting points when analyzing the economy to see if its a major disturbance to economic well being or just a small wake up call.

 

 

 

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