Updated: Jan 3
Signs of a Recession and How to Regain Some Personal Control
I will try not to slant this in any particular way, but I think some things need to be said regarding where we are in this economic environment today and where we are headed. Depending on which sources you credit, not everyone agrees on whether we are in a legitimate recession or if we are simply navigating muddy waters right now. To break it down, we need to look at what defines a recession. The general long-standing definition of a recession has always been two consecutive quarters of negative gross domestic product (GDP). This definition has been used in college textbooks for decades.
If this definition is true,
the U.S. entered a recession during the summer of 2022.
The question of whether we entered a recession last June was, actually a cause for a “semantic” debate amongst financial professionals, economists, and of course politicians threw their two cents into the discussion as well. Then the National Bureau of Economic Research (NBER) got in on the discussion.
NBER defined a recession as a significant decline in economic activity that is spread across the economy and that lasts more than a few months – so in their way of thinking, we were NOT in a recession during the summer of 2022.
Chief Investment Officer at Orion Advisor Solutions, Tim Holland said, " [America has a robust] labor market and corporate earnings growth, ” and “ [w]e also remind ourselves that recessions are uncommon, as our economy was in recession just 8% of the time over the past 30 years. ” 1
With the Fed looking to continue raising interest rates until inflation starts to decline from the 40-year high, a true recession may be imminent. Additionally, reported low gross domestic income and the slowing of real private final domestic purchases are indicators that the economy remained stagnant in the third quarter. To add to this, the Fed is thinking about increasing unemployment and slowing the economy even more to tackle inflation.
Everything is connected. There is a ripple effect that is running through the economy.
Increased interest rates are definitely impacting
the purchasing power of real estate buyers.
The housing supply is now up, and we are no longer seeing as many or even any bidding war scenarios like we did eighteen months ago. On top of that, many people are using credit cards to pay for essentials like medications and food and gas, so our personal debt is rapidly increasing with a precarious future for payback.
Market data shows the S&P 500 fell nearly 25% during the first half of 2022 taking investors into a bear market. Traders are hopeful that the Fed might pivot away from more rate hikes, but that is a gamble some investors may not want to risk having already suffered losses between 25% and 35%. At this point, many investors are just looking to stop the bleeding; they are still paying fees on portfolios that continue to lose money. This is NOT necessary.
Options exist that provide for a stop-loss
-- meaning, no lost capital, ever.
And, zero fees.
There is no reason to continue gambling when money can grow without risk when placed in the right vehicles.
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