While there are economists predicting an early end to our current recession, there are others that believe the markets, along with exchange traded funds (ETFs), may have to endure a “double-dip” recession.

After the government stimulus starts to wear off, the U.S. economy may still be hampered by weak growth and high unemployment, which may cause a recession relapse, according to Reuters. Any additional government spending could be curbed by lack of political and investor appetite for more debt.

Jeffrey Rosenberg, head of global credit strategy at Bank of America Securities Merrill Lynch, projects U.S. growth at 0.5% to 1.5% as a response to high unemployment. In contrast, the Obama administration estimated economic growth to increase to 3.2% next year and reaching 4.6% by 2012.

If Rosenberg’s projection is correct, the economy would be susceptible to shock from the likes of oil prices and it would force the government to issue more debt, which would increase borrowing costs for the government and the private sector.

Historically, recessions caused by financial crisis have been deep and hard to come out of. In post-recovery, borrowing costs were inevitably higher because of higher public deficits. If our economy finds itself in another recession, it would not be anything new. The United States had to trudge through two recessions in less than three years back in the 1980s.

While you can’t predict a double-dip, you do have some recourse.

Protect yourself and be ready for anything. If a double-dip recession does occur, then have an exit plan ready. Our strategy for buying and selling ETFs is to use the 200-day moving average: when a position crosses above, we’re in; when it drops below or 8% off the recent high, we sell.

Tags: Obama, Trend Following