What if there's a Recession ?
Updated: Mar 16, 2022
Google rankings of search terms that include recession have gone up recently. People are getting more nervous and are likely to react by reducing their spending. I think in part due to the media pushing the recession narrative since we're coming up on an election year and the stakes are high they need maximum damage with the rhetoric. That said there are real positive and negative things happening globally. Positives are companies earnings are still decent 76% showed positive earnings Q2, jobs are strong, energy assets are up, homebuilder confidence is up. Negatives are that the EU is showing weakness with lower GDP and getting closer to recession, Germany is getting close to recession, China GDP has slowed to 4.6% growth, Chinese banks are being taken over due to debt issues, US Deficits grow, US corporate debt has grown, Tariffs are dragging on the economy and US consumer debt has grown. The net net is that the debt overhang and race to the bottom on cost of money is going to hurt all countries including the US.
So what do you do as an investor especially those later in your careers. Basically.. Raise cash... All of us should continue to make regular monthly investments through our employers retirement programs. Second if at all possible and if you're able to do so in self managed IRA's take some profits from your winning stocks to raise investment capital. Third make sure to have a large cash reserve in a interest bearing account to tap if needed. I think there is an equal chance that the market goes up in the next 12 months as it could go down. If Trump gets a China deal then the equity market will continue to go up. That said I think there will be inevitable decline in the markets. There's just TOO MUCH Debt. Those with cash will have some special opportunities to purchase assets at a discount in the future.
Also, though this is not technically a financial move, I would work to learn some additional skills since investing in yourself is one of the best returns on your money that you can have. You might be thinking of taking some speaking classes, social media marketing, coding or other job related courses. Whatever you do, look outside your company as well as within. Often companies only offer courses that benefit a narrow set of skills they want you focused on. Your learning should take a much broader course. This will of course help if there are layoffs and jobs are more scarce. You'll need either other skills to compete or possibly earn income directly from. Starting a side hustle is not a bad idea as long as you make the time to do it outside of your main source of income.