(Potential) Recession, Bear (Market), and Inflation…Oh My!

This week we had a Financial Friends chat about the current and near term economy and market. We talked about talk on Recession, Bear Market, and mostly…fear.

Here are some takeaways:
1 – You have survived a recession and maybe you didn’t even feel the impact of it. As you take a more active role in your personal finances, you’ll also pay more attention to the economy fluctuations. 

2 – Like life, economies have strong and weak periods. You can’t appreciate the good without a little bad. 🙂 The Fed (Federal Reserve) was created after the great depression to make the swings not so drastic. They do this by adjusting the federal interest rate (which you see reflected in loans, mortgages, and bank interest rates), managing money supply (if you want to go down a big rabbit hole, research M1 and M2 money), and regulating financial markets (ie the banks that are FDIC-insured). Determining the amount of money to print takes an act of congress (pay attention to what your federally elected officials are up to). It also gives me confidence that the Fed learns from past recessions, like bank regulations after the bank runs of the Great Depression, and more mortgage regulations after the Housing Crash.

3 – Don’t let fear take over. Last year, Megan Kanter spoke about paying attention to headlines (members can read the recap). There’s a lot of clickbait out (because getting eyeballs on their article allows them to sell more advertising which is their main revenue source). It’s a business model that works for them and may not work for you. For an article that isn’t trying to scare you, check out the latest blog post that Liz Windisch, CFP® shared on 4 Things You Can Do to Prepare for a Possible Recession. See how she used the word “possible,” not some doom and gloom.

4 – It’s an important time to check your risk level. Dana Edwards, CFP®, EA, MBA talked through Risk Avoidance, Risk Retention, and Risk Transfer in her presentation about Planning for the Unplanned (members can read the recap). What level of risk do you want to have with inflation, a bear market, and possible recession? There’s no right or wrong blanket answer, you’ll need to answer it for yourself as the CEO of your money. 

5 – YOLO. You only live once but you’ll leave through several recessions and weaker markets. People live their lives, get new jobs, invest more, buy real estate, start a business, grow a business, build wealth. There are some industries and businesses that perform better in recessions. In 2017, I almost bought a coaching business. The majority of their business came from severance packages from large corporations that were having layoffs. This business performed better in a weaker economy! We didn’t buy the business for different reasons but if that owner is looking to sell still, he may get a better price in a worse market. Just because it might not be a great time to get a job doesn’t mean it’s impossible to get a job. Or that the stock market may fluctuate doesn’t mean you should stop investing. As Cheryl Nelson Boyd shared, if your favorite store was having a sale, you would buy something! Some view the stock market as being on sale during a bear market with this Market Volatility (members can watch the webinar-on-demand). 

I love having these healthy, wealthy conversations with values-driven women. Knowledge is power and as we expand our Financial Literacy, we increase our Financial Confidence to build wealth in any type of economy and market.