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Safe Haven Assets Shine As Recession Looms

Recession

Unless you've been living under a rock for the past several months, you may have noticed that fears of a looming recession are growing. The general consensus is that Americans should brace for doom, gloom, massive unemployment and a stock market meltdown, but there are still some opportunities to keep your finances under control.

Recent signs that a recession is looming have sparked panic in many investors. President Donald Trump recently stated that a recession will only take place if voters stop working to reelect him in 2020, about many economists agree that it may be inevitable, regardless.

Though no person can forecast precisely when a recession will take place, one point is true: An ongoing rally in lasting United States Treasurys caused the market's most relied-upon economic downturn indicator to flash red, signaling that things are likely to get much worse before they get better.

The spread between two- and 10-year Treasury yields fell as low as -4.2 basis points, its most inverted level since May 2007. Investors have continued to seek haven assets like US federal government bonds as the trade war between the U.S. and China rages on, pressing yields lower.

A Recession Could Wreck Millennials

Millennials got slammed in the last recession, have struggled in the rebound, and are burdened with a lot more at risk than previous generations.

They are falling short of making it to the middle class, and are most likely to be the first generation in modern-day economic history to wind up even worse off than their parents.

The looming slump could compound on these issues, stalling their careers and chipping away their income right as they enter their prime earning years.

The toxic combination of lower earnings and higher student-loan debt-- combined with tight credit history-- has prevented millennials from entering the real estate market, and therefore losing a primary method to build wealth. The generation's homeownership rate is 8 percent points lower than that of the Gen Xers or the Baby Boomers when they were the same age. Now, the typical age of home-buyers has climbed to 46 years old. Related: Tesla Scrambles To Salvage Its Stumbling Solar Business

Because of this, millennials have struggled to benefit from both the stock market and real estate market rebounds.

Is Cash Really King?

Despite growing market unpredictability, numerous experts are recommending that cash may not be the best method to protect your funds during another recession.

According to UBS global chief investment strategist Mark Haefele, “A high allocation to cash over the longer-term increases the risk that investors will fail to achieve their financial goals," instead advocating for high sustainable dividend stocks and even gold.

Both trading strategies have a tested history of success, and the investment company also predicts that gold may even breach the $1,600 mark in a matter of months.

It is essential to understand that recessions do take place. All you can do is prepare as well as possible. The trick is not to panic when markets take a nosedive and reverse that preparation. By cashing out in the lows, you will miss out on the possibility to benefit from rebounding stocks when things begin to turn around.

By Michael Kern via Macro-Investing.com

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