Experts are now saying that it is more likely than not that the US will fall into a mild recession by the end of 2022. How will this affect your personal finances? What you can do to prepare.
A variety of finance experts, as well as business leaders, are in agreement that a recession this year is more likely than not and that Americans should be prepared for declining growth, high prices, and higher interest rates.
These dire predictions come despite statements from US Treasury Secretary Janet Yellen, who argues a recession is not “at all imminent.” Yellen also said that inflation is “unacceptably high.” One must remember that at the end of May, Yellen admitted she was wrong about her past statements which claimed inflation would only be transitory.
“I think I was wrong then about the path that inflation would take,” Yellen told CNN.
Mortgage rates are up, and the Federal Reserve raised interest rates last week by a three-quarter percentage point, the largest amount since 1994, and more hikes are expected amid the war on inflation.
“With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in the fourth quarter of 2022 is now more likely than not,” Nomura economists wrote, Bloomberg reported.
In a survey by CNBC of CFOs at top corporations and organizations, released the second week of June, not a single CFO believes a recession can be avoided.
However, some think it won’t take shape until next year. Three-quarters of CFOs expecting recession in first half of 2023, the Hill reported.
They anticipate an 18% decline in the Dow Jones industrial average as compared to 2022.
The number one recommendation from the experts can be described in a single word: Save.
With inflation ratcheting up the cost of everything, experts recommend avoiding all unnecessary spending and tucking away as much money as you can in a high-yield savings account.
On June 13, 2022, the S&P 500 entered a bear market. Investment experts say diversification, helps reduce risk, while dollar-cost averaging can help lower your cost basis during bear markets, according to the Motley Fool.
However, as stocks are tumbling, many investors are choosing treasury securities amid a bump in the 10-year yield. However, there are still decent yields for short-term treasury bonds as well.