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After stocks fell this week, here’s how to protect your finances in times of uncertainty: “Hard landing will eventually be inevitable.”


It was a damn week on Wall Street.

Dow Jones Industrial Average
S&P 500

and the Nasdaq Composite

all closed on a low Friday after falling on Thursday, giving up all rallies on Wednesday after the Fed.

The Federal Reserve on Wednesday raised the base interest rate by 50 basis points. Fed Chairman Jerome Powell said that at the next meeting, the central bank is unlikely to raise the base rate by 75 basis points, but promises 50 consecutive base rate increases.

“We really need to see that our expectations are coming true, that inflation is actually under control and starting to fall, but we will not stop, we will just go back to raising by 25 basis points,” Powell said.

As capricious investors digest Powell’s increase by half a point and prepare for more, consumers have other worries. Two years after a brief sharp recession linked to the pandemic, Wall Street is again warning of a new recession on the horizon.

«As capricious investors digest Powell’s increase by half a point and prepare for more, consumers have other worries.

It’s not much, but financial planning experts say that should be enough to encourage people to come up with their own contingency plans. This is especially true given the fears associated with personal finances that emerged earlier during the pandemic.

The recession caused by COVID-19 has officially begun February 2020 and ended in April 2020but politicians and ordinary people are still struggling with the consequences.

The Federal Reserve is trying to curb inflation, now for a maximum of four decades. It is worrying that raising key interest rates from almost 0% and tighter monetary policy may push consumer demand to such an extent that the economy is potentially focusing on potentially – a sharp blow to another recession.

Goldman Sachs: the probability of a recession in the next 12 months is 15%

This was announced by weather forecasters in April, a few days before the last increase in interest rates by Powell. In the next 24 months the chances will increase to 35% they wrote.

In a research note in April by Deutsche Bank

said: “We believe that a hard landing will eventually be inevitable by the end of the 23rd / beginning of the 24th after an aggressive series of Fed raises over the next 18 months.” And this even with the good financial condition in which many consumers are now, She added.

If there’s one lesson about finance and investment in the last two years, it’s that market-leading events “can always be just around the corner,” said Joel Kandyk of Savant Wealth Management in McLean, Virginia. “Although several problems are currently known – global and domestic – that could cause a recession, the real drivers of the market may be surprises that no one knows about today,” said Kandyk.

Here’s one point of data on how quickly things can go away: people earning up to $ 40,000 a year are suddenly faced with a 40% chance of losing their jobs in April and May 2020, Powell marked in July 2020 during the peak of the first wave of the COVID-19 pandemic.

During 2020, 15% of all American adults had at least one attack of unemployment, according to the Pew Research Center. said in April. Average low-income household incomes fell 3% from 2019 to 2020, adjusted for inflation, Pew researchers say. They noted that the average income of middle-income people earning between $ 52,000 and $ 156,000 fell by 2.1%. Researchers note that the average income of people earning more fell by 0.5%, which has not changed.

However, for many people it was a quick financial pain.

Perhaps softening the blow this time, Fanny Mae said the U.S. economy is facing “modest recession”In 2023, in part due to the tightening of the Fed’s monetary policy, Russia’s war in Ukraine and rising interest rates.

MarketWatch spoke with financial experts to find out what families can do now to prepare for the recession:

1. Pay off debt and build a money cushion

In a downturn market you won’t want to cash out stocks or other investments to fund the many cost of living. And the increased risk of losing a job means that many families face the reality of having to reunite to manage.

MarketWatch listened to 10 different financial experts, and one piece of advice that was universal was to fix your finances in advance. Debt reduction, especially debt with high interest rates for example, credit card moneyreduce the number of monthly payments for which you are responsible, and release cash on the following basis.

Even without a recession it is good to think about debts with high interest rates. For example, experts say Ready credit card ready to grow with an additional increase in the Fed’s rate on the horizon. This will make it even more expensive to shift the balance from month to month.

It is also always important to keep the emergency fund on a rainy day, but such a daily affair can be easily postponed. Under normal circumstances, experts recommend having enough savings to cover the cost of three months. But the recession is different.

“During a recession, it can be harder to find a job if you’re unemployed, so increasing emergency savings to 6-12 months can provide extra security,” said Summer Red, education manager at the Association of Financial Advice and Education Planning.

2. Rethink future major purchases

Gaining control over your expenses is always a smart financial move. But it is especially important to look closely at large purchases, especially if the market is volatile.

“Avoid shopping with your eyes and avoid shopping because everyone says you have to do it now,” said Kate Militz, head of special groups at the Association of Financial Advisory and Planning Education. “The housing market, car sales are great examples of goods with big tickets that make us feel good at first, but have very high prices that we carry with us for years.”

3. Remove emotions from investing

In many ways, a recession is a test of willpower. For many, it is natural to respond to a downturn by changing their investment strategy – either out of fear of losing money, or out of a desire to take advantage of what seems like an opportunity.

About two-thirds Investors (61%) expect even greater market volatility in the next 12 months, according to a nationwide survey of people investing assets worth at least $ 100,000. Seven out of 10 said they were concerned about the recession during that 12-month period.

But succumbing to such an emotional approach is risky, especially when it comes to retirement savings. Adopting a “disciplined, systematic strategy” before investing will remove emotions from the equation, said Lisa A.K. Kirchenbauer, founder and president of Omega Wealth Management, located in Arlington, Virginia.

If you’re postponing a major purchase you plan to make in the next few years, consider actively moving those funds into a safe asset or savings account – even if it means giving up more returns in the meantime.

When it comes to retirement savings, the choices you make should come down to where you are in life and how soon you plan to retire. “Pension costs do not come immediately, but over 20 or even 30 years, so it is important to be careful to maintain a certain degree of distribution of long-term goals, even in the first year of retirement,” said Kandyk.

4. Automate your finances

For people who don’t trust themselves to be able to manage their money without letting emotions get in the way, automating your finances can be helpful. This includes everything from setting up automatic payments on accounts to creating direct deposits in savings or investment accounts.

The best advice, according to many financial experts, is to ignore the markets as much as possible when it comes to long-term savings. Automating your finances will make it easier to achieve.

5. Focus on your career

The brief recession that occurred at the start of the COVID-19 pandemic was accompanied by a massive rise in unemployment across the country. In April 2020, the unemployment rate soared to 14.8% – the highest level recorded since these data began to be tracked in 1948.

With the recession associated with COVID, the job market quickly rebounded. As of March 2022, the unemployment rate amounted to 3.6% and employers are still hungry for work. The rate of 3.6% is simply ashamed of the pre-pandemic figure of 3.5%, the 50-year low. It’s certainly a good rebound, but it’s not always given. The Great Recession, which began around 2008, was marked by high levels of long-term unemployment.

Unemployment and recession go hand in hand. When the economy is in recession, companies have to make cuts to stay afloat. In the event of a COVID recession, young people are most affected by the pandemic-related job loss, the report said. Institute of Economic Policyleft think tank.

For people who are currently working, taking the time to prepare for the possibility of dismissal is a smart move.

“Expanding your certifications, skills and experience to make yourself valuable to current or potential employers are smart steps you need to take now to isolate yourself from a potential recession,” said Greg McBride, chief financial analyst at Bankrate.com.

This story was first published on April 21, 2022 and updated on May 5, 2022.

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