How a Possible 2016 Recession Impacts Day Traders
Is A Recession Ahead for 2016?
Analysts and investors have been in an unenviable position since the beginning of 2016. January presented the poorest start for a year as far back as most of us can recall, oil prices remain at record lows, and global economic conditions have been shaky at best. China itself, the world’s second largest economy, has experienced a significant downturn in retail sales, slowing wage growth, and other areas. Economists are pointing to the fact that global economic expansion has now lasted for 80 months, making us historically long overdue for an adjustment or downturn.
CEOs of global corporations are not as fearful of recessionary trends. Inge Thulin of 3M indicated in a USA Today interview that the enterprise fully expects to continue its history of paying dividends next year for the 100th year. Inge sees modest growth Western Europe and also continued growth in the US and China markets, although those economies have witnessed a slowdown recently.
Stocks have experienced a roller coaster ride that has made even the most seasoned investor reach for the antacids on more than one occasion, and employees have watched with great concern as their 401-K accounts swing up and down from day to day.
In spite of the economic slowdown the stock market appears to turn itself around amidst announcements of stable or even reduced earnings expectations. This flies in the face of traditional logic that says stock prices are largely determined by earnings and dividend performance. Whatever the rationale behind investors and day traders’ actions that have boosted markets back from their dismal start for 2016, the trend appears to be that any significant recession may not be in the cards for 2016.
Low unemployment reports still provide a level of confidence that sluggish economies are still growing, just at a reduced pace. A recovery in China and US economic growth are important trends to be considered as critical points in avoiding a real recession in 2016, but some analysts believe that conditions are evolving that will turn those trends around. On the energy market side analysts themselves are trying hard to determine whether or not the low price of oil is now going to be the “new normal” rather than being a short-term phenomenon.
All these questions indicate that even the best minds in the investment world can’t say with any level of certainty if there will be a recessionary period in the future, even if not the immediate future. True discovery of such economic times is generally only witnessed in hindsight. Well-respected economists have even revealed their concerns that perhaps there is something evolving that they have simply not recognized yet.
How Do Day Traders Fare if There is a Recession Ahead?
One of the intrigues and attractions of day trading is that gains (and yes, losses) are realized immediately. This makes profits immune to recessionary influences by the very nature of day trading strategy: observe the trends and indexes at a specific point in time to take advantage of likely moves that will be achieved in the same day – or even in the next few minutes or hours. Long-term periods of recession do not have the same effect on day trading investments as it lends to those investors with buy-and-hold philosophies.
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