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A recession is an economic contraction or period of decline. Unlike stagnation or a slowdown in economic growth, a recession involves the active contraction of an economy as measured by GDP. Different precise definitions exist, some economists measuring them in months, but a standard definition is two quarters of successive economic contraction. During a recession, and often just before, the prices of equities and other speculative assets typically fall, while safe haven assets such as gold and the US Dollar often rise.
A recession can be caused by a market downturn, and recessions regularly cause bear markets, but they are not the same thing. For a recession to occur the entire economy must experience negative growth for a set period, which may or may not be accompanied by a financial crash. In practice, almost all recessions see a weakening in the stock market, but not all market crashes trigger a recession. Recessions can be limited to a single country, a region, or in serious cases can take hold worldwide.
During a confirmed recession, traders normally rotate out of ‘risk on’ assets and into their ‘risk off’ equivalents – so out of equities, corporate bonds, and emerging markets currencies and into safe haven assets such as gold, government bonds of stable nations, and global reserve currencies. This process can sometimes happen before a recession is confirmed, as markets tend to be very responsive to slight changes in economic conditions. Once a recession is well underway equity prices might be depressed, presenting buying opportunities for traders willing to wait until better times.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
ADSS
8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
Trading Services
ts@adss.com
+971 2 657 2414
Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities L.L.C – S.P.C (“ADSS”), a limited liability company – sole proprietorship company incorporated under United Arab Emirates law. Registered under Commercial License No.1190047. ADS Securities L.L.C S.P.C is regulated and authorised in the UAE by the Capital Market Authority (CMA) under Category 1 License No.305027 (Trading Broker, Trading and Clearing Broker, Trading Broker in the International Markets, Trading Broker of OTC Derivatives and Currencies in the Spot Market, Financial Products Dealer) and Category 5 License No.20200000217 (Introduction). Registered Office: 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
