Wealth Dictionary
Recession
A recession is an economic downturn characterized by a significant decline in economic activity, widespread unemployment, reduced consumer spending, declining business investment, and negative GDP growth lasting for a prolonged period, typically two consecutive quarters or more. Recessions are part of the natural economic cycle and are caused by various factors, including external shocks, financial crises, monetary policy tightening, fiscal policy changes, geopolitical tensions, and structural imbalances in the economy. Recessions lead to reduced production, lower corporate profits, bankruptcies, layoffs, and a general slowdown in economic growth, resulting in adverse effects on households, businesses, and financial markets. Governments and central banks implement stimulus measures, monetary easing, and fiscal policies to mitigate the impact of recessions, stimulate economic recovery, restore confidence, and stabilize financial markets. Recessions present challenges and opportunities for investors, requiring prudent risk management, asset allocation adjustments, and portfolio diversification to navigate volatile market conditions, identify value opportunities, and position portfolios for long-term growth and resilience amidst economic uncertainties and market fluctuations.
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