When a recession rolls around, it’s natural to worry over the negative aspects. And it’s true that a recession causes a lot of hardship for people. No one wants to try to manage their money — or their lives — through a recession.
However, it’s not all doom and gloom. There are some things that actually improve during a recession. So, while we don’t wish difficulty on anyone, following are some silver linings that accompany an economic down cycle.
1. Cheap stocks
For those hoping to boost future portfolios, a recession is the time to go bargain hunting. As the stock market drops, you might be tempted to sell and abandon what feels like a sinking ship. However, instead of locking in losses, recessions can be time to look for good deals and buy more stock while shares are cheaper.
“During the Great Recession that began in 2007, the market fell 50%, hitting bottom on March 5, 2009, with the Dow Jones Industrial Average closing at 6,594 points. (It’s now at about 20,000.) If you were lucky or smart enough to buy anywhere near that bottom, you’d have tripled your money, even after the market’s recent nosedive.”
The market has fallen a bit more since Stacy wrote those words, but the underlying message remains the same: Buying when the market is low can pay off down the road.
Of course, you won’t be able to predict exactly when the market bottom will arrive, but you can still get a good deal on stocks if you buy them when they’re at a lower price. Stacy recommends looking at blue-chip stocks with dividends, as well as considering index funds. Many of these shares are on sale now and might be a good value in the coming months.
Later, as the market recovers, your bargain hunting today could pay off in a big way. Of course, there are no guarantees in life. But taking advantage of downturns in the past always has paid off in the long run. Chances are good that it will this time, too.
2. Lower death rate
Interestingly, the mortality rate can fall during a recession. Between 2005 and 2010, a time period that included the Great Recession, mortality rates actually fell as unemployment in urban areas rose, a recent study found.
One of the biggest contributions to the lower death rate was a decline in the cardiovascular (heart) disease mortality rate. Car accidents were another category that saw a reduced mortality rate.
“When the economy is worse, people have less money to spend. They may go out and have unhealthy meals less often. They may smoke less or drink less. They may drive less. That’s kind of what people have in mind when they’re thinking about why increases in unemployment are linked to decreases in mortality.”
We probably need more information to figure out the causes of a lower death rate during a recession, but a decrease in mortality might be one of the positive aspects of the situation.
3. People re-evaluate what matters
Many people re-evaluate their lives in times of stress, and think about their budget priorities.
In the early part of 2009, during the thick of the Great Recession, the savings rate increased to 6.9% — its highest level since 1993, according to a PBS report of the time. That also represented a jump from the near-zero savings rate of early 2008.
By January 2020, the savings rate was at 7.9%, according to the Bureau of Economic Analysis. The steep rise from zero savings rates to nearly 8% a dozen years later shows that as people feel more concerned about economic conditions, they shift their priorities to thrift.
Additionally, they might also think about other life choices during a recession. The New York Times reported that many people rethink what it means to have a good life during tough economic times.
“And yet, despite this bleak reality, some talk persists of silver linings: less cash to spend means less materialism, a real change to “the definition of living well,” as Jim Taylor, a vice president of Harrison Group, a market research firm in Waterbury, Conn., told The Times as the big banks melted down in the fall of 2008.”
It’s not all sunshine and rainbows, but there are those who find that economic stress causes them to look at what really matters — time with family and friends.
What about you? Are you looking for silver linings as we face the prospect of a recession? Let us know in comments below or on our Facebook page.