Just as our climate has seasons, so does the US economy. Growth in consumer spending and production warms the economy, bringing with it sunny financial conditions that often last three to six years. But slowdowns-as measured by a shrinking gross domestic product-lead to chilling recessions.
Just as our climate has seasons, so does the US economy. Growth in consumer spendingand production warms the economy, bringing with it sunny financial conditionsthat often last three to six years. But slowdownsas measured by a shrinking grossdomestic productlead to chilling recessions, each lasting an average of 10 monthssince World War II.
This January, it looks like an economic winter may soon accompany our environmentalwinter. The credit crunch that started with the subprime mortgage mess precipitateda decline in home prices that may burst the housing bubble. Weakness in the housingmarket usually dampens the overall economy. In my view, we could be on the leadingedge of a US recession.
So, what can you do to help your investment portfolio weather the storm?
Like the seasons that control our weather, the cycle of economic change is a natural part of the climate for investors. So plan for the elementsboth fair and foulby investing in an all-weather strategy.
Ben Utley, CFP, is the founder and president of Utley Financial Planning (www.utleyfp.com) in Eugene, OR. As an independent, fee-only financial advisor, he works with physician families across the United States who are uncertain about their personal finances and want to achieve financial security that can last a lifetime.