If You Fear a Recession is Approaching...

5/1/2020

From 2008 to 2018, the United States economy went from recovery mode after the Great Recession to a period of record growth. By the time 2019 rolled around, the stock market was routinely climbing above all previous highs, even as it bounced back and forth in response to one global crisis after another. 
However, every time a record was set in the Dow Jones, NASDAQ or S&P 500 indices, some naysaying economist managed to get quoted saying that a downturn was coming, and that downturn might reach recession levels.
The downturn did indeed surface, but not because of any major economic factor. The coronavirus happened, and the threat of contagion forced the American economy and much of the world economy to shut down temporarily to prevent the spread of the deadly virus. All stock market numbers plunged, unemployment skyrocketed, and all those recession predictors came back out of the woodwork proclaiming the coming long-term demise of the American economy. 
Based on what you know about current economic conditions, do you believe a recession is coming? And if so, how do you plan to react?
If ever there was a time for an investor to have a financial advisor available to handle personal financial matters, this is that time. No matter what level of concern you have regarding the immediate future of the American economy, a lengthy conversation with your financial advisor would probably be advised.
There is no set definition of “recession’’, no specific economic marker that must be reached in order to produce a declaration of despair. Formerly, economists considered a recession to be when there was a decrease in gross domestic product for two successive quarters. But the National Bureau of Economic Research no longer holds to that definition. Instead, the NBER states that a recession is a significant decline in economic activity spread across the economy that lasts more than a few months and is reflected in GDP, employment numbers, wholesale-retail sales, industrial production and real income. It places more emphasis on a longer time period and more factors before placing the ‘recession’’ term upon a period of economic behavior. 
But there is no one economic number that determines that the economy is in a recession.
Households don’t care whether any economic official declares the state of the nation’s financial situation is dire. All they care is how it is impacting their personal finances, and in that case, many investors today are probably convinced the nation is either already in a recession or headed that way.
According to Spectrem’s ongoing study Corona Crash: What Advisors Should Be Saying To Investors Now, 74 percent of investors believe the United States will experience a recession going forward. Those investors who tend to vote Democratic are more likely (86 percent) to believe the economy is headed I that direction, but even 61 percent of investors who vote Republican believe a recession is on the horizon.
At the same time, 63 percent of investors believe it will take at least one year for the economy to return to some sense of normalcy, and more than one-quarter believe it will be at least two years before normalcy is re-attained. 
There are a lot of subjects investors need to discuss with their advisor as it relates to the current state of economic affairs. The impact will be felt throughout most of your investment plans: retirement income, education decisions for your children or grandchildren, current liabilities and current property ownership. Every topic could be addressed in a meeting with your financial advisor.
And if you believe a severe recession is headed our way, you need to express that opinion to your advisor so that decisions can be made that will prevent greater loss should your prediction come true. Advisors can also prevent you from making decisions that will be harmful if the overall impact of the coronavirus is not as dire as some may suggest.