What is a Global Recession?

There has been talk recently about the United States economy staring down a recession. Recessions happen when there is a general downturn of the economy as a whole with regards to job loss, falling stock prices, and declining investments. But have you heard of a global recession? What is it and how might you continue to invest during one? Let’s take a look.

What is It?

When there is a marked and steady decline of economic growth worldwide, it is referred to as a global recession. This usually occurs when several economies slow down at the same time in varying countries. When this happens, international trade is affected which sends economic shockwaves around the world. When both trade and stocks are affected, the entire world feels the pinch and recession can spread from one national economy to another. 

When the gross domestic product (GDP) decreases across the board, it must also include weakening trade as well as employment, among other factors. These criteria must be met before the International Monetary Fund (IMF) declares a “global recession.”

Impact of a Global Recession

A global recession has a different impact from country to country. The relationship between one country and another with regards to trade will be the determining factor of how the global recession will affect a nation’s economy, specifically the sector of its manufacturing. However, should the country have efficiency with its investments along with sophisticated markets, it might not be as deeply impacted through the financial industry.

The Great Recession

Between the years of 2007 and 2009, the world’s economy declined into what’s known as the Great Recession. When Lehman Brothers filed for bankruptcy in 2008, the stock market reeled from a major correction when the housing bubble burst. The world economy had already taken a nosedive in 2007, and the bankruptcy of 2008 only served to make an enormous worldwide financial crisis, and both inflation and unemployment went critical. 

This led to the stock market finally bottoming out in 2009. Ensuing years, however, saw a much-needed uptick in the market, but smaller countries with more fragile economies took longer to recover. Even now, well over a decade later, the effects of the Great Recession can be seen (and felt) in certain countries and their lagging markets. 

The United States suffered so badly during these years due to the fact that the downturn of 2008 happened right here within our own economy. If it had happened elsewhere, the US wouldn’t have been hit so hard due to our limited relationships in trade with other countries when compared to the size of our economy. 

How You Can Invest

If the world once again plunges into global recession, there are still ways you can (and should) invest. Check out our list of stocks that are more secure than others during an economic downturn. These stocks include goods and services everyone needs, such as cleaning supplies, retail, utilities, and healthcare. Be smart with your investments and buy stocks that will remain solid, even when the economy tanks. Once the markets bounce back, you’ll be flying high.

To learn more about investing, closing the racial wealth gap, and growing generational wealth for Black and brown families, please visit Financial Joy School and become a part of our financial family.