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Are Recession Fears Overblown?

Are Recession Fears Overblown?

| June 07, 2022

Did you know that economists predicted six of the last two recessions?

Actually, an economist will know tomorrow why the things he or she predicted yesterday didn’t happen.

Both of these happen to be wisecracks in our industry, but there is much truth behind the chuckles.

There is a lot of fear brewing today. We are not only dealing with an economic residual of the pandemic, but also supply chains that have not found their way back to normalcy – creating a “new norm” that resembles nothing pre-2020. After all, there is a “great migration” occurring as people move between states and a “great resignation” as people are in a position to go after new jobs and careers. The way in which we do business is forever changed due to a virtual interaction boom, and innovations were forced on companies that actually proved beneficial for the long-term. New companies and concepts were born; old ones have died out. Everyone is looking for a more quality of life—simplify, accessibility, service, and balance.

Yes. It is a little like the game 52 card pickup post-COVID…. and no one likes that game!

If that isn’t enough, a little more has been added to the plate. Inflation has shown up for the first time in decades and the Federal Reserve plans to fight it with rising interest rates, which might certainly put a damper on the so-called “heart-beat of America—” home buying and remodeling.

The tragic war in Ukraine speaks for itself and created ripples that we have watched become title waves in the way of the squeeze on the global economy. From grain to fertilizer to oil to production of goods to who knows what, we are feeling the impact. No one is exempt.

Oh, and wait...I forgot to mention this is an election year. Things get crazy during an election year—and this year is no exception. Both parties are pulling out all of their aces, which can rattle many parts of the economy and markets.

The question is: Does all of this add up to a doom and gloom situation like we saw during The Great Recession?

BlackRock, a multinational investment management firm with over 10 trillion under management, just released their viewpoint on the matter at the Morningstar Investment Conference:

Kate Moore, managing director and head of thematic strategy at Black Rock stated they believe a recession is unlikely over the next four quarters. “BlackRock is squarely in the no-recession-at-this-moment camp.” She stated that they are actually encouraged at BlackRock even with the pressures from all of the areas previously mentioned…. “Frankly, by the health of the consumer balance sheet, the health of the corporate balance sheet, and think we’re going to be able to weather the storm.” 1.

Fear and greed are the two strongest human emotions. The strongest of the two is fear. Because of this, it is easy to lean toward the idea of doom and gloom and let that be your guide.

The problem is that emotions make terrible financial advisors.

There is a saying that markets climb a wall of worry. It is true. Have you thought about the fact that the stock market is actually considered a “leading economic indicator?” This means it is a ‘tell’ as to what may follow in the economy. What if the ride we are experiencing now is the worst it gets in the near term?

Of course, it may not be. There may be doom and gloom to come. But here is the reality of it all….

This inflation thing is real, which means fear is a good way to go broke safely. On the other hand, these markets are tough.

Tough markets call for tough disciplines. Just as Moore from Blackrock indicated to Bloomberg, Investors can profit, even when inflation is causing broader markets to tumble. 2.

It is important to remain proactive, but not emotional. News Flash: your investments will NOT make money all of the time!

Investments cycle. Economies cycle. It is important to understand the economics of today’s threats and opportunities and remain attentive. And more importantly is to understand it with a steady hand and steady head.

Question: If the market fell apart like it did in 2008, would you be sleeping well?

If not, you are taking the biggest risk of all. You are taking the risk that your emotions will managing your future.

Don’t let this happen!

We don’t know if a recession is on its way or if it isn’t, but either way, we are ready to weather the storm. Are you?