Ggthjy

Dilemma of explaining to interviewer that he is the reason for declining second interview

Is a debit card dangerous in my situation?

Is it a fallacy if someone claims they need an explanation for every word of your argument to the point where they don't understand common terms?

How can my powered armor quickly replace its ceramic plates?

Injecting creativity into a cookbook

CREATE ASSEMBLY System.DirectoryServices.AccountManagement.dll without enabling TRUSTWORTHY

How can animals be objects of ethics without being subjects as well?

What is 6÷2×(1+2) =?

Porting Linux to another platform requirements

How to avoid being sexist when trying to employ someone to function in a very sexist environment?

How do you funnel food off a cutting board?

Table formatting top left corner caption

Why is mind meld hard for T'pol in Star Trek: Enterprise?

Can you tell from a blurry photo if focus was too close or too far?

what does しにみえてる mean?

Why do members of Congress in committee hearings ask witnesses the same question multiple times?

Why exactly do action photographers need high fps burst cameras?

Caruana vs Carlsen game 10 (WCC) why not 18...Nxb6?

Why did the villain in the first Men in Black movie care about Earth's Cockroaches?

What are "industrial chops"?

Am I a Rude Number?

How to deal with an incendiary email that was recalled

What is the wife of a henpecked husband called?

Digits in an algebraic irrational number

Why do stocks necessarily drop during a recession?

How do small cap stocks perform vs. large cap stocks (like Dow constituents) during bear trends?Why do people always talk about stocks that pay high dividends?What exactly happens during a settlement period?Should I talk about my stocks?Are bonds really a recession proof investment?How to sell a stock in a crashing market?How to invest in the stock market during a recession?Does every recession start with a trigger/shock? What are the likely triggers for the next one?Should I squirrel money and wait until the next recession to invest in TD E-Series?ADR value with US dollar inflation / recession

9

2

Why do stocks drop during a recession?

Where does the money go in favor of these assets?

Or is the first question not true?

stocks investing recession

share|improve this question

edited 15 hours ago

Bob Baerker

16.7k12450

asked 20 hours ago

MaxedMaxed

20317

add a comment | 

9

2

Why do stocks drop during a recession?

Where does the money go in favor of these assets?

Or is the first question not true?

stocks investing recession

share|improve this question

edited 15 hours ago

Bob Baerker

16.7k12450

asked 20 hours ago

MaxedMaxed

20317

add a comment | 

Why do stocks drop during a recession?

Where does the money go in favor of these assets?

Or is the first question not true?

stocks investing recession

share|improve this question

edited 15 hours ago

Bob Baerker

16.7k12450

asked 20 hours ago

MaxedMaxed

20317

share|improve this question

edited 15 hours ago

Bob Baerker

16.7k12450

asked 20 hours ago

MaxedMaxed

20317

share|improve this question

edited 15 hours ago

Bob Baerker

16.7k12450

asked 20 hours ago

MaxedMaxed

20317

edited 15 hours ago

Bob Baerker

16.7k12450

edited 15 hours ago

Bob Baerker

16.7k12450

asked 20 hours ago

MaxedMaxed

20317

asked 20 hours ago

MaxedMaxed

20317

4 Answers
4

active

oldest

votes

23

During a recession, economic growth slows. This can lead to higher unemployment which in turn results in lower consumer and company spending which in turn leads to decreased company revenue and profit, lowering the fundamental value of stocks.

Lower investor confidence contributes to market decline as investors move to safer assets (defensive stocks, bonds, certificates of deposit, money market accounts). Some people, particularly the newly unemployed, pull money out of the market just to meet basic needs.

share|improve this answer

edited 13 hours ago

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  Thanks for answering. What are CDs? And what does "Money markets" mean?
  
  – Maxed
  15 hours ago
  

  
  
  
  


• 
  
  
  

  
  11
  

  
  
  
  
  
  

  
  
  @Maxed : Apologies for the native English speakers who don't understand the issues with abbreviations and localized jargon. CD in this context is a Certificate of Deposit. "Money Market" has more than one meaning, but I suspect he's referring to a type of bank account with a higher interest rate but restrictions on the number withdrawals per month. (I have no idea if this is a uniquely American thing)
  
  – Joe
  15 hours ago
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  Also Precious Metals, Property ...
  
  – Daniel
  14 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  I was wondering, too, what a collection of CDs (in my locale meaning "compact disks", a vintage music and data storage medium) can improve investor's standing during recession :)
  
  – Pavel
  13 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  @Pavel just try to insulate your cardboard box with MP3s
  
  – MikeTheLiar
  13 hours ago
  

  
  
  
  

add a comment | 

4

The stock market is a market.

When there's a lot of money in a market, and everyone is competing to buy a limited number of stock shares, demand is high and prices tend to go up.

However in a recession there is job loss so people have less to spend, people with jobs are catching up their emergency funds instead of investing, people are competing to sell the shares they have to fund life needs, and there are fewer buyers to meet the supply. That tends to drive prices down.

share|improve this answer

answered 12 hours ago

HarperHarper

23.3k53579

• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  Most of the people living hand to mouth don't participate much in the stock market in the first place. They don't sell shares because they don't own any.
  
  – Barmar
  10 hours ago
  

  
  
  
  

add a comment | 

2

As for "where does the money go", the fact that a stock price goes down doesn't mean money is going anywhere.

E.g. if a stock is first priced at $100, but then some shares are traded between investors at a price $90, then that is the new value of the stock. But only some shares now have a new owner, and no money left.

share|improve this answer

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

add a comment | 

1

One way to value a stock is the present value of all future dividends. If the slowing economy is going to reduce dividends, or increase the probability of the reduction of dividends, this will reduce the value of the stock by definition.

share|improve this answer

answered 6 hours ago

ChuuChuu

1112

New contributor

Chuu is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

add a comment | 

Your Answer

StackExchange.ready(function() {
var channelOptions = {
tags: "".split(" "),
id: "93"
};
initTagRenderer("".split(" "), "".split(" "), channelOptions);

StackExchange.using("externalEditor", function() {
// Have to fire editor after snippets, if snippets enabled
if (StackExchange.settings.snippets.snippetsEnabled) {
StackExchange.using("snippets", function() {
createEditor();
});
}
else {
createEditor();
}
});

function createEditor() {
StackExchange.prepareEditor({
heartbeatType: 'answer',
autoActivateHeartbeat: false,
convertImagesToLinks: true,
noModals: true,
showLowRepImageUploadWarning: true,
reputationToPostImages: 10,
bindNavPrevention: true,
postfix: "",
imageUploader: {
brandingHtml: "Powered by u003ca class="icon-imgur-white" href="https://imgur.com/"u003eu003c/au003e",
contentPolicyHtml: "User contributions licensed under u003ca href="https://creativecommons.org/licenses/by-sa/3.0/"u003ecc by-sa 3.0 with attribution requiredu003c/au003e u003ca href="https://stackoverflow.com/legal/content-policy"u003e(content policy)u003c/au003e",
allowUrls: true
},
noCode: true, onDemand: true,
discardSelector: ".discard-answer"
,immediatelyShowMarkdownHelp:true
});


}
});

draft saved

draft discarded

Sign up or log in

StackExchange.ready(function () {
StackExchange.helpers.onClickDraftSave('#login-link');
});

Sign up using Google

Sign up using Facebook

Sign up using Email and Password

Post as a guest

Name

Email

Required, but never shown

StackExchange.ready(
function () {
StackExchange.openid.initPostLogin('.new-post-login', 'https%3a%2f%2fmoney.stackexchange.com%2fquestions%2f105864%2fwhy-do-stocks-necessarily-drop-during-a-recession%23new-answer', 'question_page');
}
);

Post as a guest

Name

Email

Required, but never shown

23

During a recession, economic growth slows. This can lead to higher unemployment which in turn results in lower consumer and company spending which in turn leads to decreased company revenue and profit, lowering the fundamental value of stocks.

Lower investor confidence contributes to market decline as investors move to safer assets (defensive stocks, bonds, certificates of deposit, money market accounts). Some people, particularly the newly unemployed, pull money out of the market just to meet basic needs.

share|improve this answer

edited 13 hours ago

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  Thanks for answering. What are CDs? And what does "Money markets" mean?
  
  – Maxed
  15 hours ago
  

  
  
  
  


• 
  
  
  

  
  11
  

  
  
  
  
  
  

  
  
  @Maxed : Apologies for the native English speakers who don't understand the issues with abbreviations and localized jargon. CD in this context is a Certificate of Deposit. "Money Market" has more than one meaning, but I suspect he's referring to a type of bank account with a higher interest rate but restrictions on the number withdrawals per month. (I have no idea if this is a uniquely American thing)
  
  – Joe
  15 hours ago
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  Also Precious Metals, Property ...
  
  – Daniel
  14 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  I was wondering, too, what a collection of CDs (in my locale meaning "compact disks", a vintage music and data storage medium) can improve investor's standing during recession :)
  
  – Pavel
  13 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  @Pavel just try to insulate your cardboard box with MP3s
  
  – MikeTheLiar
  13 hours ago
  

  
  
  
  

add a comment | 

23

During a recession, economic growth slows. This can lead to higher unemployment which in turn results in lower consumer and company spending which in turn leads to decreased company revenue and profit, lowering the fundamental value of stocks.

Lower investor confidence contributes to market decline as investors move to safer assets (defensive stocks, bonds, certificates of deposit, money market accounts). Some people, particularly the newly unemployed, pull money out of the market just to meet basic needs.

share|improve this answer

edited 13 hours ago

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  Thanks for answering. What are CDs? And what does "Money markets" mean?
  
  – Maxed
  15 hours ago
  

  
  
  
  


• 
  
  
  

  
  11
  

  
  
  
  
  
  

  
  
  @Maxed : Apologies for the native English speakers who don't understand the issues with abbreviations and localized jargon. CD in this context is a Certificate of Deposit. "Money Market" has more than one meaning, but I suspect he's referring to a type of bank account with a higher interest rate but restrictions on the number withdrawals per month. (I have no idea if this is a uniquely American thing)
  
  – Joe
  15 hours ago
  

  
  
  
  


• 
  
  
  

  
  2
  

  
  
  
  
  
  

  
  
  Also Precious Metals, Property ...
  
  – Daniel
  14 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  I was wondering, too, what a collection of CDs (in my locale meaning "compact disks", a vintage music and data storage medium) can improve investor's standing during recession :)
  
  – Pavel
  13 hours ago
  

  
  
  
  


• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  @Pavel just try to insulate your cardboard box with MP3s
  
  – MikeTheLiar
  13 hours ago
  

  
  
  
  

add a comment | 

During a recession, economic growth slows. This can lead to higher unemployment which in turn results in lower consumer and company spending which in turn leads to decreased company revenue and profit, lowering the fundamental value of stocks.

Lower investor confidence contributes to market decline as investors move to safer assets (defensive stocks, bonds, certificates of deposit, money market accounts). Some people, particularly the newly unemployed, pull money out of the market just to meet basic needs.

share|improve this answer

edited 13 hours ago

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

share|improve this answer

edited 13 hours ago

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

answered 19 hours ago

Bob BaerkerBob Baerker

16.7k12450

4

The stock market is a market.

When there's a lot of money in a market, and everyone is competing to buy a limited number of stock shares, demand is high and prices tend to go up.

However in a recession there is job loss so people have less to spend, people with jobs are catching up their emergency funds instead of investing, people are competing to sell the shares they have to fund life needs, and there are fewer buyers to meet the supply. That tends to drive prices down.

share|improve this answer

answered 12 hours ago

HarperHarper

23.3k53579

• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  Most of the people living hand to mouth don't participate much in the stock market in the first place. They don't sell shares because they don't own any.
  
  – Barmar
  10 hours ago
  

  
  
  
  

add a comment | 

4

The stock market is a market.

When there's a lot of money in a market, and everyone is competing to buy a limited number of stock shares, demand is high and prices tend to go up.

However in a recession there is job loss so people have less to spend, people with jobs are catching up their emergency funds instead of investing, people are competing to sell the shares they have to fund life needs, and there are fewer buyers to meet the supply. That tends to drive prices down.

share|improve this answer

answered 12 hours ago

HarperHarper

23.3k53579

• 
  
  
  

  
  1
  

  
  
  
  
  
  

  
  
  Most of the people living hand to mouth don't participate much in the stock market in the first place. They don't sell shares because they don't own any.
  
  – Barmar
  10 hours ago
  

  
  
  
  

add a comment | 

The stock market is a market.

When there's a lot of money in a market, and everyone is competing to buy a limited number of stock shares, demand is high and prices tend to go up.

However in a recession there is job loss so people have less to spend, people with jobs are catching up their emergency funds instead of investing, people are competing to sell the shares they have to fund life needs, and there are fewer buyers to meet the supply. That tends to drive prices down.

share|improve this answer

answered 12 hours ago

HarperHarper

23.3k53579

share|improve this answer

answered 12 hours ago

HarperHarper

23.3k53579

answered 12 hours ago

HarperHarper

23.3k53579

answered 12 hours ago

HarperHarper

23.3k53579

2

As for "where does the money go", the fact that a stock price goes down doesn't mean money is going anywhere.

E.g. if a stock is first priced at $100, but then some shares are traded between investors at a price $90, then that is the new value of the stock. But only some shares now have a new owner, and no money left.

share|improve this answer

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

add a comment | 

2

As for "where does the money go", the fact that a stock price goes down doesn't mean money is going anywhere.

E.g. if a stock is first priced at $100, but then some shares are traded between investors at a price $90, then that is the new value of the stock. But only some shares now have a new owner, and no money left.

share|improve this answer

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

add a comment | 

As for "where does the money go", the fact that a stock price goes down doesn't mean money is going anywhere.

E.g. if a stock is first priced at $100, but then some shares are traded between investors at a price $90, then that is the new value of the stock. But only some shares now have a new owner, and no money left.

share|improve this answer

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

share|improve this answer

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

answered 8 hours ago

RemcoGerlichRemcoGerlich

44429

1

One way to value a stock is the present value of all future dividends. If the slowing economy is going to reduce dividends, or increase the probability of the reduction of dividends, this will reduce the value of the stock by definition.

share|improve this answer

answered 6 hours ago

ChuuChuu

1112

New contributor

Chuu is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

add a comment | 

1

One way to value a stock is the present value of all future dividends. If the slowing economy is going to reduce dividends, or increase the probability of the reduction of dividends, this will reduce the value of the stock by definition.

share|improve this answer

answered 6 hours ago

ChuuChuu

1112

New contributor

Chuu is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

add a comment | 

One way to value a stock is the present value of all future dividends. If the slowing economy is going to reduce dividends, or increase the probability of the reduction of dividends, this will reduce the value of the stock by definition.

share|improve this answer

answered 6 hours ago

ChuuChuu

1112

New contributor

Chuu is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

share|improve this answer

answered 6 hours ago

ChuuChuu

1112

New contributor

Chuu is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

answered 6 hours ago

ChuuChuu

1112

New contributor

Chuu is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.

answered 6 hours ago

ChuuChuu

1112