Timely & Relevant News: Recession vs Depression

Over the last couple of weeks we have been discussing the uniqueness of this recession. A common question we are seeing is, "Are we heading into a depression?" The good news is that researchers and investors are saying they don't see that happening.

What Defines a Depression?
A depression is much more severe than a recession. A depression is characterized by longevity and lasts more than three years. Depressions can also be characterized by a decline in real GDP of at least 10 percent.

The United States has weathered many recessions over the years. We have only ever experienced one severe economic depression, The Great Depression in the 1930's.

Four Mistakes After The Crash of 1929

After the stock market crash of 1929 there were four major mistakes that the government made that only added to economic decline.

  1. The Fed tightened monetary policy to help stave off outflows of gold.
  2. The government increased taxes on individuals and corporations to help balance the budget. Additionally, the government cut spending by 25%.
  3. The government increased regulation, which hampered small businesses.
  4. There was a severe global trade war across the nation.

LPL Financial Senior Market Strategist Ryan Detrick stated that, "Looking at today, we have a very accommodative Fed. The government isn’t increasing taxes and instead they are directly trying to help those impacted by this tragedy. There are no new regulations and although there’s the trade dispute between China and the US, this isn’t a global trade war at all like the 1930s."

Updates from Covenant Wealth Strategies

In keeping with the Governor of Delaware's orders, Covenant has decided to postpone all events for April indefinitely. We are continuing to monitor the situation and will remain in close contact with our clients.

If you have any specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at  contactus@covenantwealthstrategies.com to set up a mutually convenient date/time to speak.

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