LearnVestonomics: Could We Be Headed For A Double Dip Recession?

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If you’re talking about Ben & Jerry’s, a double dip is decadent, but when talking about the economy, it’s a lot less sweet. We’ve heard a lot of chatter on the wires that this economy may be headed toward one such “double dip,” in which the stock market heads back into another downward spiral after a short recovery.

So, we want to know: Are we due to experience a double dip? What does it mean for us? Here are the 4 things you need to know:

1. How Do We Know If We Are In a Double Dip?

Technically, the economy experiences a double dip when it goes back into recession after experiencing a period of recovery.  It’s officially a recession when the economy shrinks instead of grows for six months straight. The stock market is experiencing a “bear market” double dip when it declines 20% or more from its most recent peak.

2. Are We There Yet?

The latest economic news has been far from upbeat; the latest stock market news has been a series of roller coaster-like twists and turns.  However, according to the definitions given above, we are not yet having a double dip.

3. What Will The Future Hold?

Alas, this is the one question that no one—and I really do mean no one—knows the answer to. Over the years, most statistics tend to trend towards their long run averages. So, in the 1980s and 1990s, we had exceptionally robust growth, whereas the first decade of this century is dubbed by some “the lost decade.” If regression to the mean holds true, there is a case to be made for another decade of less than breathtaking growth ahead. Whether or not this translates into a true, technical double dip is anyone’s guess.

4. Regardless, It’s Okay—Just Make Sure To Invest Responsibly

What happens to the economy is anyone’s guess, which is why it’s so important to follow the “Five Year Rule” when investing and only put money in the market that you can afford to keep there for the long run. If you want your money back in just a couple years, go with safer options like certificates of deposit (CDs).

The only double dip you can control with certainty is the one at the ice cream counter, and those taste much better.

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  • Danielle

    Before reading this article I had no idea what the definition of a recession was…thanks for explaining this in such easy-to-understand terms! :-)