Recession Alarms

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“Strongest Recession Signal Yet: Alarm Bells Sound as Key Indicator That Predicted Last Wall Street Crash Goes Negative”

“A possible recession? Treasury yields invert, sounding economic alarm bells.”

“Dow tumbles 800 points in biggest one day fall of year on global economic growth slowdown.”

Wednesday was a wild day for the stock market as the Dow plummeted 800 points.

What triggered the selloff? A phenomenon known as “inversion-yield curve” that has a been a pretty reliable predictor of recessions in the past 60 years. It was all-around bad news in the bond market on Wednesday when the 30-year Treasury note saw its yield fall below 2.05 percent, its lowest on record.

However, that wasn’t the only alarm. When the 10-year Treasury note dropped below the two-year bond’s yield – a unique situation known as an “inversion-yield curve” – investors headed for the exits. Why? Because this inversion phenomenon has preceded every economic decline in the U.S. for the past 60 years, making it a reliable bellwether of recession.

When a hurricane hits, the least prepared are the ones devastated the most. The ones that are prepared are able to weather the storm and in many cases, emerge unscathed. They’re not the ones snatching food and water off the shelves at the grocery stores or lining up at gas stations to get out of Dodge. They already have supplies on hand and are ready to ride out the storm.

The UHNWIs are always prepared for an economic downturn.

The ultra-high-net-worth individuals (“UHNWIs”) didn’t need to hear about inversion-yield curves to prepare for a recession. The 800 point drop in the Dow on Wednesday didn’t touch them. That’s because they’re always prepared for a downturn.

Many of them will also tell you that a recession was long overdue. As of July of this year, the U.S. officially broke the record for the longest economic expansion in history going back to 1854 when expansions and recessions started being tracked according to the National Bureau of Economic Research. The previous record was 120 months from March 1991 to March 2001.

Although we’re long overdue for a recession; the truth is, the wealthy probably ignore the news because their wealth is not tied to Wall Street. So, while everybody else was running for the hills and unloading stocks and other Wall Street products on Wednesday to slow the hemorrhaging of their portfolios, the wealthy sat back and ignored the noise.

What’s the silver lining in all of this? It’s not too late to avoid economic disaster when the gathering downturn clouds hit full Category 5 recession. The wealthy weather recessions by allocating their investments towards tangible, asset-backed, cash flowing, and recession-resistant investments – specifically commercial real estate. Sure, there are segments of commercial real estate like retail and office that are affected by economic downturns, but there are segments that actually thrive in downturns.

The affordable housing segment thrives in economic recessions.

Demand for affordable housing consistently outstrips supply, which will only widen with a downturn. This has been particularly true since the Financial Crisis of 2008, where the supply of affordable housing has been severely constrained.

You don’t have to wait for the other recession shoe to drop to protect yourself from the oncoming economic heartache that will affect the broader population. Recent regulatory changes to securities laws have leveled the playing field for investors at all levels, so you can protect yourself and prepare like the wealthy have been doing for decades. 

With the loosening of private investment advertising rules through the passage of the JOBS Act that launched in 2016, access to private real estate investment opportunities was suddenly opened up to qualified investors like never before.

Before the JOBS Act, sales of securities in private companies were typically only accessible to the wealthy and well-connected since advertising was prohibited. Now through advertising and crowdfunding, private commercial real estate investment opportunities are available to qualified investors everywhere, with low barriers to entry without sacrificing return, with many examples of firms showing annual returns exceeding 10%.

You don’t have to fall within the “mega-wealthy” class of investors to access investments to prepare and protect yourself from the next recession.  Look for opportunities to invest in real assets – especially the kind that cash flow and thrive in a downturn. Commercial real estate in the affordable housing category is the ideal class to protect yourself from any oncoming economic storms.

Are you prepared for the next economic downturn?

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