ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As investors start to anticipate a recession, they may flee to the relative safety of bonds. Typically, they’re expecting the Federal Reserve to lower interest rates, helping to keep bond prices up. So going into a recession may be an attractive time to purchase bonds if rates haven’t yet fallen.

Detailed explanation-2: -1. US Treasury Bond/ Federal Bonds. Federal bonds or US Treasury bonds are issued by the Federal Reserve System (made up of the central bank and monetary authority of the United States.) Investors favor Treasury bonds during a recession because they’re considered to be a safe investment.

Detailed explanation-3: -How Do Recessions Affect Investors? Typically during the early part of a recession, the stock market has negative returns. This is often because of the negative sentiment around poor or lackluster corporate earnings. But the stock market will often recover before the recession is over.

Detailed explanation-4: -Do interest rates rise or fall in a recession? Interest rates usually fall during a recession. Historically, the economy typically grows until interest rates are hiked to cool down price inflation and the soaring cost of living. Often, this results in a recession and a return to low interest rates to stimulate growth.