What is a recession? Investors need to know 3 things to avoid losses

An expanding economy leads to wealth, but when recession คืออะไร this question becomes equally important because an economic downturn can quickly erode investment profits.

What does Recession mean and how does it differ from Depression

Recession คือภาวะชะลอตัวของกิจกรรมเศรษฐกิจในวงกว้างเป็นระยะเวลานาน generally, economists use several indicators to confirm a recession—whether it’s GDP contracting for two consecutive quarters, declining employment, or shrinking production volume.

The U.S. National Bureau of Economic Research (NBER) ( defines recession as “a significant decline in economic activity lasting at least 6 months,” considering GDP, income, employment, production, and retail sales.

While recession แปลเป็น “ถดถอย” then Depression )ตกต่ำ( is much more severe—a prolonged decline lasting over 3 years with GDP shrinking more than 10%. The Great Depression in America )1929-1939( lasted 10 years with unemployment exceeding 25%, representing the harshest example in modern economic history.

Causes of Recession—and why it’s hard to predict

Recession doesn’t stem from a single cause but results from a combination of factors:

Government crises: Frequent interest rate cuts to curb inflation often lead to a slowdown in consumption and investment. For example, the oil crisis in the 1950s-1970s increased production costs.

Accumulated debt: Before the 2007 financial crisis, the real estate sector was buoyant with reckless credit expansion. When housing prices fell, poorly developed financial instruments collapsed, leading to losses that spread from the financial sector into the real economy, with GDP contracting by 5.1%.

Decline in foreign demand: For export-dependent countries, recession in major markets )such as the US, China, Germany, Japan( impacts trading partners.

Psychological triggers: Droughts, viruses, or global events like )9/11( can cause sudden disruptions in consumption and production.

The 3 US crises since 2000—and what asset prices did

) 📉 Tech Bubble ###The Dot-Com(: 8 months of global forgetfulness )March-November 2001(

NASDAQ 100 fell 82%—from a peak of 4,861 to 850. Unemployment soared to 6.3%, GDP shrank by only 0.3%. It was quick and mild.

However, the 9/11 event further prompted the FED to cut interest rates from 6.5% )July 2000( to 1% )July 2003(. This rapid stimulus helped the economy recover quickly.

) 🏚️ The biggest crisis ###The Great Recession(: 18 months of suffering )Dec 2007 - June 2009(

GDP contracted by 5.1%—unemployment rose to 10%. Meanwhile, housing index rose from 140 )2000( to 220 )2006-2007( until the subprime mortgage crisis exploded.

The US Federal Reserve had to implement Quantitative Easing )QE( totaling over $1.75 trillion, lowering interest rates to zero, with three rounds of QE )2009, 2010, 2012(. The recovery took more than 7 years.

) 😷 COVID-19 Crisis ###The COVID-19(: 2 months of chaos )Feb-Apr 2020(

GDP plummeted 19.2%—unemployment surged to 14.7% from 3.5%. All within just 2 months.

The largest buildup: QE4 expanded the FED’s balance sheet from $4.1 trillion to nearly )trillion, with interest rates at 0.25% until March 2022.

Recession fears: which assets rise, which fall

When recession hits, risk-off sentiment emerges as investors flee risky assets for safe havens. Looking at COVID-19:

Note: When the government injects more money )QE(, currencies tend to weaken. Diversifying across different asset classes becomes more important than relying solely on “safe” assets.

✋ 3 things investors should avoid when recession is approaching

) ❌ Do not #1: Increase risky assets Risky assets ###stocks, crypto, futures( tend to lose value during recession. Playing with eggs in one basket is a losing game.

) ❌ Do not #2: Take on high debt Every recession is an opportunity to buy at lower prices, but high debt means your income must go toward debt repayment first. No surplus for investment. Unnecessary credit card debt or borrowing is an enemy of long-term growth.

❌ Do not #3: Borrow with variable interest ###ARM(

Recession origins: government cuts interest rates, but as recovery begins, rates rise again. ARM loans can surprise you with higher bills. Choose a fixed-rate mortgage )FRM( and lock in the rate for the entire term.

✅ 3 things investors should do when recession hits

) ✓ Do #1: Shift to safe assets Gold, bonds, or stable assets with steady returns act as a shield during early recession phases.

✓ Do #2: Rely on steady income sources

Stable jobs, freelancing, or diversified income streams provide capital to “buy low” during recession. Cash-rich investors are the winners.

✓ Do #3: Lock in current interest rates

If planning to buy a house or invest, take advantage of low rates during recession. Lock in a fixed rate ###FRM(; these low rates will be valuable 10-20 years later.

Summary: Recession is not the end, but an opportunity for those prepared

A recession is a shakeout for investment portfolios—if you survive, long-term returns can be much higher.

Experienced investors don’t try to predict recessions )really hard( but instead prepare portfolios for all scenarios. Diversification, holding cash, and maintaining calm are winning strategies.

What is a recession? It’s a period when people buy high and sell low. Investors who endure are those who buy low and profit massively later.