For the last several months, just about every news organization in existence has aired its fears of recession. Some speculate that this recession is inevitable. Others believe it’s already here.

Those who read my blog regularly know this topic creeps its way into just about every article these days. It feels repetitive, I know – largely because it is.

But as I take stock of the systems, trends, and tendencies behind the business trends we need to know about… it’s almost impossible to avoid the subject.

So today, I’m just going to go for it and discuss exactly what we mean when we say “recession.”

If you ask Investopedia, it broadly defines the word as, “a significant decline in general economic activity in a designated region.” Meanwhile, many average Joes and Janes would define it more as a feeling or state of existence.

When you and the people you interact with in person or via technology all report the same sort of financial discouragement? Well then, you’re in a recession.

I don’t say that to mock anyone. First off, I get it. Secondly, sometimes the feeling and the fact really do go together.

But if you’re looking for an “official” definition, you have to turn to the National Bureau of Economic Research, which describes it as:

“… a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

So are we in a recession?

“Officially”, the answer is a big fat unhelpful maybe. We do know that, in the last few months, we’ve seen contractions in GDP, squeezes on spending power, and stress in the retail sector.

Last week, Fortune reported:

“The Bureau of Economic Analysis will share U.S. GDP data for Q2 2022 on July 28. If that data shows negative economic growth, it’s likely that… NBER, the nonprofit academic organization that officially declares recession periods in the U.S., will argue that the economy has entered one.”

However, there is reason to remain optimistic, including this morning’s jobs report. To quote Yahoo Finance:

“The U.S. labor market remained a bright spot in the economy last month despite mounting talks of a recession as the Federal Reserve tightened monetary conditions and some companies warned of layoffs, data from the Labor Department showed Friday.”

It then cited how:

• Non-farm payrolls increased 372,000 instead of the 268,000 expected.
• The unemployment rate held steady at 3.6%.
• Average hourly earnings, month-over-month rose 0.3%, as expected.
• Average hourly earnings year-over-year jumped 5.1% versus the 5% even that analysts anticipated.

These are major factors when determining how well or poorly the economy is doing. And, at the moment, they’re holding steady.

But are they enough? Suffice it to say, this post-pandemic economy is strange and ever-evolving. The whole world changed in 2020.

Maybe our idea of recession should change as well.

More Non-REIT News to Know About 

Speaking of 2020…

Since the pandemic, microchips have seen a meteoric rise in prices. Since everything from computers to cars and gaming consoles to kitchen gadgets require memory chips, these price increases have had significant impacts on inflation.

Demand for these coveted components reached a fever pitch at the same unfortunate time as supply was severely hampered. Many manufacturers even had to pause production as a result.

But we have good news from The Wall Street Journal on that front:

“The average contract price for a major type of memory, called DRAM, fell by 10.6% during the April-to-June quarter versus the prior year, the first such decline in two years, according to TrendForce, a Taiwan-based market research firm. Prices are expected to decline even more dramatically in the months ahead.

“Prices of DRAM, which enables devices to multitask, peaked last fall and began sliding on a quarter-to-quarter basis, though [they] still remained higher than the prior-year periods until recently.”

These price plunges seem to be affecting the broader market in a myriad of ways. Last week, for instance, Samsung – the world’s biggest memory-chip manufacturer – predicted revenue dips for the April-June period.

If true, this will upset a solid run of record sales for the last three quarters.

Meanwhile, Micron (MU), the third-largest maker, issued revenue guidance well below analysts’ estimates. It claims it will have to cut industrial expansion plans and slash capital expenses.

But on the consumer end, there’s reason to rejoice as expensive necessities hopefully decrease in price from here.

We “end-users” could certainly use a break. And I, for one, am not going to look this gift horse in the mouth if I don’t have to. 

The World According to REITs 

I’ve always touted real estate investment trusts (REITs) as a great way to “recession-proof” your portfolio. With diverse market exposure and consistent dividend income, they reward investors despite recession bells ringing.

Obviously, you can’t just buy into any old REIT at any old time. You need to properly evaluate the sector it’s in its individual metrics, and its price point.

But when you do, you’re almost always bound to find a worthwhile buy.

Take AvalonBay Communities (AVB). It’s a high-quality apartment landlord and one of the largest publicly-traded REITs around. We’re talking about a market cap of $27.5 billion here.

It’s also well-diversified geographically speaking. As I recently wrote, its “properties are largely situated in or around coastal urban markets.” But “we’re seeing a strong resurgence in these areas.”

The company has produced a total return compound annual growth rate (CAGR) of 13.4% since its 1994 IPO. Yet it’s down on its luck anyway, with shares showing a definite downward trend for the year.

I’ll be the first person to admit that AvalonBay will struggle to generate those same results over the next three decades. However, this company is a blue-chip stock if we’ve ever seen one and a great way to generate wealth over time when the buy-in price is right.

Which it seems to be right now. With that said, I’m still going to add in my author’s note below…

Author’s Note: If you do determine this stock is right for you, make sure to purchase it at a smart entry point. Even the best of companies can burn you badly by buying in at inflated prices.

More By This Author:

Let’s Look At The Labor Market
The Economy Continues to Keep Us on Our Toes
Commodities Actually Cooled Off