Article

Dynamics of a Rolling Recession

Dynamics of a Rolling Recession

Essentially, a rolling recession is a localized downturn that hits specific areas of an economy while others remain robust. They can be challenging for investors, as well as offer opportunities. Here are tips on how to understand a rolling recession, or sometimes called a rolling bear market, and navigate the economic environment with financial resilience.

September 13, 2023
Dynamics of a Rolling Recession
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

Over the past year, the global economy has faced a series of rolling recessions – periods of economic decline that impact specific sectors or regions without bringing down the entire economy. This phenomenon, although concerning, is not necessarily as disastrous as it may sound. It reveals a nuanced picture of economic resilience, courtesy of offsetting pockets of strength. As an investor, understanding these dynamics can help guide investment decisions and strategies.

Understanding Rolling Recessions

Rolling recessions, sometimes referred to as rolling bear markets, are essentially localized downturns that hit specific areas of an economy while others remain robust. These can be industry-specific, region-specific, or even product-specific. They may be triggered by a variety of factors such as regulatory changes, technological disruptions, trade conflicts, or even sector-specific demand and supply imbalances.

For example, if there's a technological disruption that renders certain jobs obsolete in a specific sector, that sector could experience a recession while others continue to thrive. Similarly, a region heavily reliant on one industry may suffer if that industry faces a downturn, while regions with a more diversified economic base continue to grow.

The Economy’s Safety Net

The simultaneous existence of these recessions and robust sectors illustrates the complex, interconnected nature of modern economies. It also underlines an inherent resilience, as healthier areas can help stabilize the economy and prevent a full-blown, nationwide or global recession. These healthier sectors can absorb displaced labor, offer investment alternatives, and maintain overall economic activity.

It's akin to a natural ecosystem: when one species is in decline, others may thrive and maintain the balance. Similarly, in an economy, when one sector is facing a downturn, others that are more robust can provide the necessary counterbalance.

Navigating Rolling Recessions as an Investor

For investors, rolling recessions offer both challenges and opportunities.

On the one hand, these can lead to portfolio losses if one is heavily invested in a sector or region that enters a recession. On the other hand, they can provide opportunities to buy assets at discounted prices and diversify into more resilient sectors or regions.

Hence, the key to navigating rolling recessions lies in regular communication with your financial advisor, maintaining a diversified investment portfolio, staying informed about economic trends, and being flexible in adjusting investment strategies based on changing conditions. Investors can work with their advisor to keep a pulse on both macroeconomic indicators and sector-specific trends.

Knowledge Matters

While rolling recessions can unsettle investors, they need not trigger undue alarm. In fact, they highlight the resilience of a diversified economy and can present unique investment opportunities. With a good financial advisor who understands the economic landscape and sound investment strategies, investors can not only navigate these downturns but potentially turn them into profitable ventures.

As we move forward in this ever-evolving economic environment, remember that a professional financial advisor who is knowledgeable and adaptable is your most valuable asset. Use them wisely to spot opportunities, mitigate risks, and ensure your financial resilience, no matter the economic weather.

Other content you may like

  • GRATs: A Planning Tool for Business Succession

    GRATs: A Planning Tool for Business Succession

    September 27, 2022
    Have you heard about the ways to reduce your family’s tax burden while keeping your business intact? With this planning tool you can put all or part of your company’s stock into an irrevocable trust that pays you, the business owner, a fixed income for a specified number of years, being especially useful if a business or estate assets will appreciate in value.
    Read this Article
  • Travel Tips that Save

    Travel Tips that Save

    July 1, 2023
    You might love to travel because of the opportunities for new experiences and adventures. Being an educated consumer means you may get more mileage out of your travel dollars. Here are 4 money-saving tips that are worth looking into so that you can enjoy your vacation whether it’s this summer or any time of year.
    Read this Article
  • A Welcome Market Rally

    November 4, 2022
    October was the welcome reversal of a difficult September. Strong Valley team members, Adam and Chris, recap the month of October and talk about key factors that caused the Market to rally, plus a discussion on the silver lining to rising rates.
    Read this Article
  • World Leader in Wetlands & Waterfowl Conservation

    World Leaders in Wetlands & Waterfowl Conservation

    June 17, 2022
    For 85 years, DU has conserved, restored, and managed over 15 million acres of wetlands in North America, conserving nearly 800,000 acres in California alone. Strong Valley was a proud sponsor of the recent fundraiser dinner for Fresno Ducks Unlimited. $0.83 of every $1 raised goes directly back into conservation!
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset