Recession Rich

Recession Rich

Investopedia / Theresa Chiechi

What Is Recession Rich?

"Recession rich" is a slang term used to describe someone who manages to increase or maintain their wealth during a financial recession

Depending on the circumstances, the term may not necessarily apply to someone who would be considered “rich” under normal circumstances. Instead, it might simply refer to someone who experienced significantly less hardship than those around them, such as a neighbor who is able to maintain or renovate their home at a time when others in their neighborhood are hit with foreclosures.

Key Takeaways

  • "Recession rich" is a slang term referring to those who are unusually well-off during a recession.
  • It may refer to those who are merely suffering less than those around them.
  • Certain investment strategies, such as buying foreclosed homes, may actually perform better during tough economic times.

Understanding Recession Rich

The term “recession rich” was used during the Great Recession that followed the 2007–2008 financial crisis. During this time, unemployment, evictions, and home foreclosures spiked throughout the country, with many individuals, companies, and government bodies forced into bankruptcy. Of course, as in all recessions, the impact of the decline was not felt evenly across the economy, leading some individuals and organizations to fare much better than others. 

For instance, the discount retailer Dollar Tree Inc. (DLTR) saw its stock rise by more than 60% during 2008, a year in which the S&P 500 index dropped by nearly 40%. Retirees or other investors who had significant portions of their portfolios invested in Dollar Tree prior to 2008 may have been far less severely impacted by the overall market turmoil. Such a person might therefore have been seen as “recession rich” from the perspective of their peers.

Similarly, when the government imposed lockdown measures throughout the United States in response to the 2020 COVID-19 pandemic, shares of companies in certain key industries—such as restaurants, hotels, airlines, cruises, and casinos—were hit particularly hard. American Airlines Group (AAL), for example, saw a nearly 70% decline between February and March, while Royal Caribbean Cruises (RCL) saw more than an 80% drop over the same timeframe.

Meanwhile, some major technology companies saw substantial gains in the post-COVID environment, even surpassing their pre-COVID highs. This was especially true of companies that allowed people to work or take classes easier from home via video conferencing, streaming video services, and e-commerce. Other companies in the pharmaceutical industry that worked on successful COVID treatments and vaccines saw a big boost. Investors with portfolios concentrated more in these high-flying names might therefore be seen as “recession rich” from the perspective of other investors.

Example of Recession Rich

At times, the term “recession rich” can be used to refer to people who have simply suffered less economic hardship than those around them. For instance, consider a homeowner in a small town that has been hit hard by a recession. If the homeowner’s neighbors mostly rent their homes, they might be faced with eviction notices if they are unable to pay their rent.

The homeowner, meanwhile, might have a slightly greater ability to make their mortgage payments, such as if they have accumulated equity in their home which they can access through a home equity line of credit.

In this scenario, the homeowner might be considered “recession rich” even if their actual financial circumstances are relatively modest. Alternatively, the term can also be used to refer to people who are genuinely thriving in difficult times. For instance, some real estate investors are able to generate unusually high returns by purchasing foreclosed real estate that is being sold at fire-sale prices.

Article Sources
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  1. Yahoo Finance. "Dollar Tree, Inc. (DLTR)." Accessed Sept. 21, 2021.

  2. Yahoo Finance. "S&P 500 (^GSPC)." Accessed Sept. 21, 2021.

  3. Yahoo Finance. "American Airlines Group Inc. (AAL)." Accessed Sept. 21, 2021.

  4. Yahoo Finance. "Royal Caribbean Group (RCL)." Accessed Sept. 21, 2021.

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