US GDP Falls by Most Since 2008: How Much Worse Will It Get?

US GDP Falls by Most Since 2008: How Much Worse Will It Get?

Economic data released last week showed that US gross domestic product (GDP) dropped 4.8% in the first quarter of the year, the most since the “Great Recession.” Since those numbers only captured data through the end of March, it’s highly likely that those numbers will get even worse as the year progresses. Just how much worse is unknown, but it could make 2008 look like nothing.

Because these first quarter numbers only caught about two weeks of economic lockdowns, the data for the second quarter is almost guaranteed to be significantly worse. In percentage terms, the 4.8% drop is the second-highest since 2008, with only the fourth quarter of 2008 coming in worse, at 8.4%. Now that April has come and gone with the country basically on full lockdown, with many states set to continue lockdowns through May and into June, and with reopenings possibly dragging on for months, the stage is set for an abysmal figure for the second quarter of the year. That 8.4% drop from 2008, when everybody was afraid the world was ending, could look tiny in comparison to this year’s numbers.

In fact, we could be on the verge of another depression, with economic recovery highly unlikely to look like the V-shaped recovery that everyone is hoping for. Remember that an 8.4% drop in 2008 resulted in stock markets losing over 50% of their value. If this quarter’s drop is anywhere close to the 20-30% that many analysts fear, we could very easily see stock markets falling off a cliff like they did during the Great Depression. Losses of 80% wouldn’t be out of the question, and most investors would have decades of investment gains completely wiped out, with no hope of ever winning them back.

That’s the real danger that investors today face, yet too many of them are acting like deer in headlights, so stunned by what they’re seeing that they’re not doing anything to protect themselves. They could be rolling over their 401(k) assets into a gold IRA, an easy move without tax consequences that can protect their savings, yet many don’t know that’s even an option. Many more, even when informed about the benefits of a gold IRA, don’t plan on doing anything to help protect their retirement savings. They’re convinced that if they just ride everything out, they’ll end up better on the other side.

The problem with that is that by the time this stock market crash bottoms out, the Dow Jones and S&P 500 could be at levels that they first reached in the late 1990s. Two decades of investment gains would be completely wiped out, and it could be years before investors are able to recoup their losses. In an even worse scenario like the Great Depression, it could take decades for markets to regain their previous levels. Unless investors prepare for that today, they may find that their dreams of retirement will vanish into thin air.

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