UK Recession: Investing During an Economic Downturn
Feb 21, 2024
auto_awesome
Exploring the impact of recession on investments, wage disparities between US and UK, financial situations of Japan vs UK, global economic status indicators, importance of global diversification, difference between recession and depression, potential triggers for economic downturn
An economic downturn does not necessarily spell disaster for investments, global diversification is key for stability.
Difference between recession and depression: minor growth rate changes vs. severe and widespread economic contraction.
Deep dives
The UK and Japan slipped into recession at the end of 2023
The UK and Japan experienced a recession in the last quarter of 2023, while growth remains weak in Europe and China. However, the speaker mentions that an economic downturn does not have to spell disaster for investments.
The difference between a recession and a depression
While the UK is technically in a recession, the speaker argues that the difference between a growth rate of 0.01% and contraction of -0.01% is not significant. The speaker also notes that the UK economy can be described as stagnant rather than in a full-blown recession. In contrast, a depression refers to a severe and widespread economic contraction, as was seen during the Great Depression.
Inflation and wages in the UK
In the UK, the CPI inflation rate held steady at 4%, which is double the Bank of England's target. Core CPI remained at 5.1%. Wage growth, while slightly lower, is still strong at 6.2% year-on-year, and services inflation is a concern at 6.5%. The speaker suggests that until wage growth decreases, inflation and productivity concerns may persist.
Global economic outlook and investment implications
While the UK is experiencing a recession, it is noted that global diversification is important for investors, as other countries such as the US and India continue to perform well. Bond investments may benefit from weak growth and falling inflation, but yields are currently unattractive. The speaker also suggests that a potential shock or geopolitical event could have a significant impact on weaker economies such as the UK and China.
The UK and Japan slipped into recession at the end of 2023, and growth remains weak in Europe and China. While the US economy is booming, much of the world is struggling — does an economic downturn spell disaster for our investments? And in today’s Dumb Question of the Week: What’s the difference between a recession and a depression?
Thanks to Freetrade for sponsoring this episode. Sign up at Freetrade.io/pensioncraft to get a free share worth between £10 and £100.
When you invest, your capital is at risk. The probability is weighted, so more expensive shares will be rarer. T&Cs apply.
This podcast is for informational and entertainment purposes and is not financial advice. We do not provide recommendations or endorse any decision to buy, sell or hold any security. We cannot be held responsible for any actions listeners may take and investors are encouraged to seek independent financial advice.
Copyright 2023 Many Happy Returns
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode