Is a Recession Coming This Year? What You Need to Know
It’s no secret that the economy has been on shaky ground lately. With rising costs, stagflation, and uncertainty due to the conflict in Europe, many economists are now predicting that a new recession is on the horizon. In this blog post, we’ll take a closer look at what factors are leading to this recession prediction and what you can do to protect yourself.
In the next twelve months, the odds of a recession are predicted to be as low as 35% by Goldman Sachs, and as high as 70% according to MIT.
Just as the global economy is bounding back from Covid 19, several compounding risk factors have many top experts saying it’s not a matter of if, but when.
Aljazeera lists “The war in Ukraine, Russia sanctions, China’s “zero COVID” policies, spiking inflation, and interest hikes by the United States Federal Reserve” as some of the reasons growth of the global economy will likely slow down in 2022.
But how do you know when a recession will actually hit?
One major factor in predicting recessions is something called the “yield curve”. The yield curve is a graph that shows how much interest rates differ between short-term and long-term bonds. Ten out of the last eleven recessions have been predicted by an inversion of the yield curve, meaning that investors and economists watch the yield curve very closely.
While the yield curve has not yet inverted, it is flattening, which means that the difference between short-term and long-term rates is getting smaller. This is often a recessionary signal.
There are many recessionary indicators that we should be aware of:
- high rate of inflation
- surging debt
- slowing consumer spending
- rising gas and energy prices
- rising commodity prices
- climate change
- any ongoing conflicts between major global powers
Do any of these sound familiar?
Each of these factors presents a risk to the economy, and when they are combined, they create an even greater risk. We are certainly heading into uncertain times.
So what should you do to prepare for a recession?
According to Harvard Business Review, there are three steps you can take be the best prepared for the next recession:
1) Pay off your as much debt as possible
Debt is a huge burden during recessionary times. If you can, now is the time to pay off as much debt as possible, including your mortgage, credit cards, and any other loans.
Doing this will free up more cash flow so that you can better weather any financial storms that may come your way.
If you’re not sure how to get started, there are plenty of resources available to help you get out of debt. Check out sites like National Debt Relief and Freedom Debt Relief for more information.
Once you’ve got your debt under control, it’s time to…
2) Decentralize your information sources
During a recession, it’s more important than ever to have access to accurate and up-to-date information. But relying on a single source for your news (like the nightly news or your favorite financial website) can be dangerous.
That’s because during a recession, the media tends to focus on negative news, which can lead to feelings of anxiety and fear.
So instead of relying on a single source, try to get your information from as many different sources as possible. This includes the news, financial websites, blogs, podcasts, and even social media.
The more information you have, the better equipped you are to make sound financial decisions during a recession.
Finally…
3) Invest in technology
During a recession, businesses tend to cut back on spending, which can lead to slower growth and fewer opportunities. But one area that is often immune to recessionary cutbacks is technology.
That’s because businesses know that in order to stay competitive, they need to have the latest and greatest technology.
So if you’re looking for an investment that will weather any recessionary storm, consider investing in technology. From cloud-based software to artificial intelligence, there are plenty of options available.
No one can predict the future, but by following these steps, you can be as prepared as possible for the next recession. Remember, prepare, don’t panic. Each recession eventually comes to an end.
So don’t wait — start planning today.
What other steps would you add to this list? Let us know in the comments below.
