Here's an interesting article dated August 31, 2007, by Jim Kingsland at Seeking Alpha titled, "Are We Headed Towards a Recession?" It notes,"A text book definition describes a recession as two consecutive quarters of falling GDP. The National Bureau of Economic Research, also known as NBER, goes a few steps further: 'A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.' " In addition, the article shares viewpoints by several economists on both sides of the question. Mr. Kingsland concludes that a recession is not far away.
Based on a recession scenario being likely in the next 1-2 years, I will be more cautious about putting new funds in the stock market, and consciously maintain at least 35% of the portfolio in cash, bonds and CDs. In addition, I will start identifying stocks for potential short positions, should an extended market decline occur.
For more on Reflections and Musings, check back every Saturday for a new segment.
This is not financial or investment advice. Please consult a professional advisor.Copyright © 2007 Achievement Catalyst, LLC