Is the Recession Over?
Don’t look now, but there could just be a light at the end of the tunnel.
After slogging our way through one of the worst financial crises in decades, we’re finally seeing signs that the economy is regaining its balance. New data shows that economic activity has firmed up in most areas of the country and that the housing market appears to be bottoming out. Thankfully for millions of investors, the stock market has also staged a nice comeback since the spring. Analysts predict that the economy will soon begin growing again, which means that this recession could already be history.
Riding the recovery
So does this mean we’ve got the green light for easy sailing here on in? Well, unfortunately, it’s not quite that easy. For most of us, even as the economy improves, it still won’t feel like things are getting any better. Unemployment will almost certainly remain uncomfortably high, even well into 2010. And there’s still the risk that another unforeseen shock to our fragile financial system could throw the economy back into disarray. When growth returns, it will likely be slow and uneven, rather than strong and steady. We’re not yet out of the woods completely, but there are a few steps you can take to make the most of this early recovery process:
• First, don’t let your guard down. Expect more volatility and bumps in the road. Make sure you’ve got a cash cushion to guard against unexpected job loss or medical expenses.
• Take responsibility for knowing exactly how you are invested – there’s no excuse not to. Now is not the time to cut back on your investing education!
• Next, use this time to reevaluate your financial plan. Most likely, you’re not the same investor you were a year ago, so make sure your plan matches your reality. Will you need to save more or work a few more years until retirement? Is the mix of stocks and bonds in your portfolio out of whack, thanks to the crazy market? Now is an ideal time to circle back and reexamine your long-term goals.
• Lastly, if you’ve been sitting on the sidelines, waiting to get back into the market, don’t wait any longer! Put that cash to work. If you wait until it looks completely safe to get back into the market, most of the post-recession gains will have passed you by. A cheap, broad-market index fund can be your best friend in times like these.
Remember, there’s still quite a bit of risk out there in the economy, and in the market, but things are looking up. The actions you take now during these challenging times will help determine your long-term success on your investing journey.
