A recession is a period of significant economic decline marked by falling GDP, rising unemployment, reduced consumer spending, and declining business activity. It is typically defined as two consecutive quarters of negative GDP growth.
Recessions can be caused by various factors including financial crises, high interest rates, oil price shocks, or pandemics. The 2008 Great Recession was triggered by the collapse of the housing market and financial system, while the 2020 recession was caused by the COVID-19 pandemic.
During recessions, stock markets usually decline, businesses cut costs, and unemployment rises. However, recessions are a normal part of the economic cycle and are eventually followed by recovery. Smart investors use recessions as opportunities to buy quality assets at discounted prices.