Are We Headed for a Recession? What Economists Are Saying
Is the Economy Currently in Recession?
As of March 14, 2023, most Wall Street economists have been expecting a recession to hit the economy by the middle of the year.[0] Despite scattered signs of hope, the next economic downturn has become the most anticipated recession in recent U. S. history.
What is a Recession Exactly?
In short, a recession is a time when there is a decrease in a nation's economic activity. A recession is defined as a prolonged period of significant economic downturn.[1] A recession is usually identified by a decrease in Gross Domestic Product (GDP) over a period of two quarters or longer, though definitions may vary depending on the source.[1]
What Can You Do to Prepare?
In order to prepare for a recession, the first step is to build up your emergency savings accounts.[2] A good rule of thumb is to aim for three, preferably six months of living expenses covered in advance.[1] It’s also a good idea to pay down debt now while you still have the chance.[2]
In terms of investing, it’s best not to flee equities completely.[3] Even when the economy is unsteady, certain sectors can still provide investors with reliable gains.[3]
What Are Economists Saying?
Economists like Lawrence Summers have been warning of a looming recession for months. Summers has even compared higher interest rates to medicine for a country sick with high inflation, saying that the entire dose must be taken for the treatment to fully work.[4]
He has also likened the economy to a “Wile E. Coyote moment”, with the economy running off a cliff and gravity inevitably winning out. Goldman Sachs analysts have advised clients to “avoid unnecessary lane changes” and “allow extra time to reach your destination”, essentially saying that no one really knows what’s going on in this economy and that they should slow down, stay the course and wait for recovery.[4]
Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, has even compared the economy to a bendable piece of plastic, saying that it displays “flexibility and adaptability, but also durability and strength”.[4]
0. “What To Expect From A Litigation Finance Industry Recession” Law360, 14 Mar. 2023, https://www.law360.com/articles/1583840/what-to-expect-from-a-litigation-finance-industry-recession
1. “Investing In A Recession? Keep These 6 Factors In Mind” ValueWalk, 13 Mar. 2023, https://www.valuewalk.com/investing-in-a-recession-keep-these-6-factors-in-mind/
2. “Opinion: Prepare now for coming recession” CTPost, 13 Mar. 2023, https://www.ctpost.com/opinion/article/opinion-prepare-now-for-coming-recession-17829615.php
3. “5 Things to Invest in When a Recession Hits” Nasdaq, 13 Mar. 2023, https://www.nasdaq.com/articles/5-things-to-invest-in-when-a-recession-hits
4. “From Wile E. Coyote to edibles: Recession forecasts are getting weird” erienewsnow.com, 13 Mar. 2023, https://www.erienewsnow.com/story/48537094/from-wile-e-coyote-to-edibles-recession-forecasts-are-getting-weird
