The Gross Domestic Product (GDP - the value of all goods and services produced) for the United States was recently reported as a negative (3.8%) for the 4th quarter of 2008. Economists were expecting a negative (5.3%).
What does it mean from the historical perspective?
Since 1990 there have been 72 quarters of activity and eight (8) of them have been negative. What happens for the first and second quarter of 2009 (through June 2009) is anyone's guess but most economists believe that negative numbers will be likely. If so, then two more quarters would put the 19 year average of normally positive growth quarters at about 87%. This period we are in is tough but it is not the norm.
I have not had a chance to go back further. I would like to look at the last hundred years so I can include the 1907 recession that lasted 4 years (16 quarters) or other difficult periods.
Where are we headed? Don't know.
The key though is to have a plan - a strategy - that is independent of what may happen tomorrow or next year. If you need income from your portfolio, then a certain number of years of safety are required - maybe 7-14 years, the rest should be in stocks. If you don't need income from your investments then even more maybe should be allocated to stocks. Time horizon is key.
This recession has lasted 16 months so far (since October 2007) and is likely to be one of the longer recessions. The stock market (measured by the DOW) historically has ended higher by the end of the recession than when it started (for the past 50+ years that I have studied). The recovery usually begins near the mid-point of the recession also when things are most pessimistic. No guarantees but history does provide lessons to heed.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.