As you’ve probably heard by now, the $700 bailout plan was rejected. The markets have reacted accordingly and have sold off aggressively. The TSX had the largest 1 day point decline in history dropping 840 points and the DJIA also had a bad day with a 777 point drop. Around the world, London’s FTSE fell 3.2%, Germany’s DAX dropped 2.9% and Tokyo’s Nikkei had a minor 1.3% drop.
Leading the charge for Canada was a crappy quarterly earnings report from RIM, weaker oil and resources. Surprisingly, Canadian financials have held up relatively well during the recent sell off (thank goodness).
That brings us to the R word, what is recession? Recession is defined as two quarters (or more) of negative gross domestic product (GDP) growth. We haven’t had a recession in Canada for 16 years and we aren’t there now. But what if there was a global recession? Would that change your lifestyle?
What to do in a global recession:
- Stop checking your portfolio numbers so often. It can be depressing watching your portfolio sink month after month. Be confident that your investment plan will come through in the long term.
- Keep Investing. Continue contributing to your investment accounts as if everything is normal as it’s only a matter of time before the markets come roaring back.
- Be Frugal. Practice frugality to raise cash to buy companies/ETF’s that are under valued. Here are a few ways to save money.
My feeling is that they will get some sort of bailout package approved, and the markets will do a temporary bounce. For you brave souls looking to make a quick trade, take a look at the horizon beta pro ETF‘s.
Question for you, if we go into a deep recession, how will it affect you? Will you spend less? Buy equities that appear cheap? Or sit back and wait for the next bull market?If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).