Which Investments Do Best–and Worst–In a Recession
wsj.com
wsj.com
When the stocks drop in value, you change your cash into stocks, buying more stocks than everyone else. Buy low, sell high.
Its like the old saying goes. A bull wins the fight by striking upwards, putting money down immediately. A bear wins the fight by waiting, and ducking down and grappling, waiting for the key moment to strike... striking the bull from below.
You save up cash before the crash, then you strike/buy up when things are cheap. The bulls can't do this because they already put their money into the market and have no cash remaining.
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Bonds are a bit weird. We all know that interest rates are going up, which means everyone knows that its best to hold onto cash right now, and wait for another +.75% gain by the end of September. Anyone buying bonds today is probably getting a bad deal (either that, or is hedging in case interest rates decline surprisingly).
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EDIT: By "cash", I mean savings accounts, high-yield savings accounts, money markets, and 1 to 2 month treasuries/CDs
Ah yes, one of those with just -1% interest instead of those low yield -3% accounts. Sure does help a lot to get true beat out of the cash pile that otherwise would drop only -7% due to inflation.
At this point, even just using your money to buy blocks of granite does better.
HYSA have 2% right now. My money-market fund is 2.3%, and my ultra-short bond funds are 3.3%.
> Sure does help a lot to get true beat out of the cash pile that otherwise would drop only -7% due to inflation.
Compared to the stock market which has dropped 17% *before inflation*, and then another 7% compounded into that this year once you account for inflation.
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$10,000 into a HYSA in January 2022 would be worth $10100 right now. Meanwhile, the same invested into SPY would be worth $8300. And then inflation hits all of us for -$700 real.
Its clear which strategy has done better this year. Its the year of the bear. The bulls have done well for the last decade, time for the bears to have a turn.
So in real value they are -5% -4.7% and -3.7% meanwhile my blocks of granite are going up by 7% minimum.