Even though stocks cratered in the
Gold and cash are two of the most important assets to have on hand during a market crash or depression. Gold historically remains constant or only goes up in value during a depression.
The bottom line is that if we were heading into another deflationary depression the best assets to own are default-free Treasury bills and Treasury bonds, with some other very high quality fixed income securities thrown into the mix.
Like candy, cigarette sales skyrocketed during the Great Depression, and tobacco stocks are still a smart buy in any recession [source: Gibbons].
The food industry is a common choice, said Robert Boyd, a sociology professor at Mississippi State University. In fact, more than half of the families whose fortunes began building during the Great Depression started there, and they now tally a combined net worth of $24.3 billion.
The classic way to profit in a declining market is via a short sale — selling stock you've borrowed (e.g., from a broker) in hopes the price will drop, enabling you to buy cheaper shares to pay off the loan. One famous character who made money this way in the 1929 crash was speculator Jesse Lauriston Livermore.
Ball and Dynan say the most “recession-proof” industries that offer strong job security during economic downturns include: health care. government. computers and information technology.
Liquidity. Your biggest risk in a recession is the loss of your job, if you're still employed or semi-employed. If you need to tap your savings for living expenses, a cash account is your best bet. Stocks tend to suffer in a recession, and you don't want to have to sell stocks in a falling market.
Coca-Cola , Archer-Daniels and Deere should like this history lesson. Even poor students of history know it never exactly repeats itself, but we all have been scratching the past for clues to guide us though the current harrowing times.
If you are a short-term investor, bank CDs and Treasury securities are a good bet. If you are investing for a longer time period, fixed or indexed annuities or even indexed universal life insurance products can provide better returns than Treasury bonds.
Federal Bond Funds
Several types of bond funds are particularly popular with risk-averse investors. Funds made up of U.S. Treasury bonds lead the pack, as they are considered to be one of the safest.
Real estate is arguably the best asset to invest in during a recession. But, it's important to understand that some types of commercial real estate have performed better than others during this recession, according to the 2021 U.S. Real Estate Market Outlook report from CBRE.
It will give them the funds to buy stocks or other assets during the decline. Because of how precious cash can be during times of financial stress, many have said that cash is king. The phrase means that having liquid funds available can be vital because of the flexibility it provides during a crisis.
The good news is your money is protected as long as your bank is federally insured (FDIC). The FDIC is an independent agency created by Congress in 1933 in response to the many bank failures during the Great Depression.
The Takeaway
So, can the government take money out of your bank account? The answer is yes – sort of. While the government may not be the one directly taking the money out of someone's account, they can permit an employer or financial institution to do so.
Investor takeaway. There are a lot of better choices than holding cash in 2022. Inflation will deteriorate the value of your savings if you decide to stash your cash in a bank account. Over the long run, you'll be better off investing now, even if expected returns are lower than they've been historically.
Most financial experts end up suggesting you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000.
In general, you want to keep cash reserves equal to three to six months of expenses. The idea is that these funds should be enough to meet your obligations even in months when you have no cash inflow.
The Economic Impact
However, a recession may even provide positive benefits for the rental market, as it is likely to encourage more people to rent rather than buy a home. To protect yourself and your company, you should have 6 months' worth of expenses in savings.