Economists: Recession on horizon
Make sure you’re prepared in case a recession happens 74% looking at 2021 downturn despite Trump’s optimism
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If the threat of a recession gives you pause when it comes to your personal finances, remember now is a time to prepare, not panic.
Worries about the economy increased this month when a fairly reliable recession warning emerged from the bond market.
But without a crystal ball, it remains unclear when a recession might hit.
Still, financial experts say people should consider taking certain steps that are beneficial in any economy but would aid households greatly in a downturn.
Don’t panic: The long-standing advice remains — don’t panic and stay the course on your plan.
It is sage advice, said Dan Keady, chief financial planning strategist at TIAA, but it also goes against the grain for many people.
“It’s hard just to do nothing,” he said. “The best investment strategy is a longterm one. If you buy and sell your investments frequently, you’ll more likely than not buy and sell based on emotion — panic or excitement.”
If you simply cannot sit still, use this pressure as an impetus to check your plan. Are your goals the same? Are your investments allocated where you want them? It makes sense to periodically rebalance your portfolio to ensure your investments have not become too heavily weighted in one segment or another, particularly after a long stock market run-up like the one in recent years.
Say, you started with 60% of your nest egg in stocks and 40% in bonds. The stock portion could have easily jumped to 70% thanks to strong gains in technology sector. Whatever the portion of your portfolio is in stocks, remember that it can lose 10% or 20% of its value as recessions come and go. That’s the price investors have paid historically for the stronger long-term returns of stocks versus bonds.
While it may be difficult, fight the urge to readjust your portfolio solely based on market conditions. People who sold during the last recession likely suffered a loss and then either missed out on major stock market gains in subsequent years or had to pay the price to jump back in.
If you originally designed your portfolio to match your long-term investment goals and risk tolerance, stay true to it, Keady said.
Try not to get too tied up in the ups and downs of the stock market too. Even those without money in the market — about half of all U.S. households — might be tempted to see the market’s move as a sign of the times even though it can have little impact on their direct financial wealth.
Save up: One of the smartest moves anyone can make is to build up an emergency fund. These are a great idea at any time to help weather unexpected expenses, but can become crucial in a downturn.
A recession typically comes with job losses, and an emergency fund can be a lifeline for many families. Even those with good job security should take heed as everyone can feel an income pinch during a recession, as companies might eliminate bonuses, reduce overtime or slow pay increases, Anastasio noted.
Experts recommend having enough set aside to cover anywhere from three months to nine months of basic expenses. So, set aside whatever money you can and keep it in an account you can readily access.
Pay off debt: It is important to pay off any high-interest debts, such as credit card balances.
Americans dramatically reduced their debts after the last recession, but those debt levels crept back up.
Paying down those debts will not only reduce the amount paid over time, it also frees up available credit that may be needed in a pinch.
Make good choices: It should go without saying, but be judicious about big financial decisions.
“I definitely think that it has been long enough (since the last recession) that here are plenty of people who have gotten comfortable with the period of growth and expansion and have forgotten some of the lessons we have learned in the past decade,” she said.
WASHINGTON — A strong majority, 74%, of U.S. business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the U.S. by the end of 2021.
The economists surveyed by the National Association for Business Economics, in a report released Monday, mostly didn’t share Trump’s optimistic outlook for the economy, though they generally saw recession coming later than they did in a survey taken in February. Thirty-four percent of the economists surveyed said they believe a slowing economy will tip into recession in 2021. That’s up from 25% in the February survey.
An additional 38% of those polled predicted that recession will occur next year, down slightly from 42% in February. Another 2% of those polled expect a recession to begin this year.
In February, 77% a recession year or in 2021.
A strong economy is key to the Republican president’s 2020 reelection prospects. Consumer confidence has dropped 6.4% since July.
Trump has dismissed concerns about a recession. He said Sunday, “I don’t think we’re having a recession. We’re doing tremendously well.”
Still, Trump on Monday called on the Federal Reserve to cut interest rates by at least a full percentage point “over a fairly short period of time,” saying that would make the U.S. economy even better and would quickly boost the flagging global economy.
In two tweets, Trump kept up pressure on the politically independent Fed and its chairman Jerome Powell, whom he chose to lead the Fed, asserting the U.S. economy was strong “despite the horrendous lack of vision by Jay Powell and the Fed.”
The latest survey was taken between July 14 and Aug. 1 — before the financial markets last week signaled the possibility of a U.S. recession, sending the Dow Jones Industrial Average into its biggest one-day drop of the year. Stock markets around the world shuddered as the White House announced 10% tariffs on an additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator. of the either economists expected this year, next