Financial
Jun 1, 2022

Ready or Not: Here Comes a Recession?

Sponsored Content provided by John B Zachary - Wealth Advisor, Pathfinder Wealth Consulting

Yes, a recession is coming. I can say with (almost) certainty that a recession is coming. But do I know when, how long, or how bad it will be? No. 

Here’s my point: recessions and market volatility are normal parts of the economic cycle and investing. Neither are fun, but they should be expected and more importantly, cannot be avoided. Out of curiosity, I recently Googled, “is a recession coming?” The search returned 99,000,000 results in about 0.46 seconds. I saw everything from “a major recession is coming” by CNN, to “3 charts that explain why the US isn't on the brink of a recession” by Business Insider. Everyone has an opinion, and the media loves to broadcast the flashiest adjectives to generate interest (and perhaps to drive fear). 

But like forecasting the weather, no one really knows. We can make an educated guess, or even form an opinion based on historical patterns and theories, but in the end, it is still a guess. To use a coastal analogy, forecasting a recession is like forecasting a hurricane. We all know that a hurricane is going to hit our coastline at some point in the future. What we don’t know is how bad it will be and precisely when it will hit. During hurricane season, do we alter our lifestyle, our spending characteristics, or our day-to-day mood based on the fear of when the next hurricane will hit? No, we soak up the summer sunshine and carry on with our lives. Each year it seems forecasters predict “the worst hurricane season ever.” They surely don’t make those claims with any real certainty. Some economists share the same negative sentiment about the economy, every single year. Will they be correct at some point? Probably. Over the past 75 years, we have had 11 recessions. That’s an average of one about every 7 years. Just like hurricanes, some have been bad, some have been not-so-bad; some have been short, some have been long. And by the way, there have been a lot more hurricanes than recessions. 

But to humor you for a second, the Bureau of Economic Analysis just released the initial GDP reading for the first quarter of 2022, and it came back at a negative 1.4%. This is following a 6.9% increase for the fourth quarter of 2021. Recessions, by definition, are two consecutive quarters of negative growth (measured by Gross Domestic Product or GDP) in the U.S. That means one more quarter of negative growth and the United States will officially be in a recession. Does it feel like we’re in a recession? Not to me. Employment numbers are good, wages are good, and consumers are still spending. The only thing that’s causing economic hardship right now is inflation, and that arguably isn’t as bad as the headline numbers, because wage increases coming out of the pandemic (thanks, stimulus) have been able to keep up with higher costs, so far. 

You might be saying, isn’t your job as a financial advisor to get ahead of market drops and avoid them? Absolutely not. The job of financial advisors, in many cases, is to keep clients from making emotionally charged mistakes that can cause dire setbacks to their retirement plans. Our job is to manage investment risks appropriately, by taking advantage of market movements, not avoiding them. Markets and money have a knack for making people do irrational things, and our job is to be the voice of reason and talk investors off the ledge when the future is uncertain, and fear is rampant. 

What else can you do? The first thing is to make sure you’re comfortable with your investment strategy and your financial plan, through the good times and the bad. Most investment companies love to advertise the potential upside of their strategies, and while that’s important, it’s also important to know the potential downside. At Pathfinder, we test our clients’ financial plans with a variety of different market scenarios, including recessions and market downturns. We want to make sure our clients can ride through these periods of time without having to make untimely shifts. If you need a second opinion on your investment strategy or financial plan, please visit our website or give us a call at 910-793-0616. We are here to guide you forward. 


Advisory services offered through Commonwealth Financial Network®, a Registered Investment Advisor.

As a wealth advisor at Pathfinder, John works closely with folks who are planning for their future, helping them stay on their financial path.  He also specializes in developing financial plans and investment strategies for the second generation and younger families.  John has been a part of the Pathfinder team for more than 12 years, serving various roles in both planning and investments for our clients. 
 


 

Ico insights

INSIGHTS

SPONSORS' CONTENT
Ubs chadpearson headshotresized

The Three Dimensions Of Selling Your Business

Chad Pearson - UBS Decision Point Wealth Consulting
Burrus rob headshot 300x300

Keep on the Lookout: Cameron School of Business Star Graduates Enter the Workforce

Robert Burrus - Cameron School of Business - UNC-Wilmington
Drewsmith copiersplus headshot

A Little More Communication, A Lot More Cohesion

Drew Smith - Copiers Plus

Trending News

Galleria Property On Wrightsville Ave. Sold For $37.5M

Cece Nunn - Aug 10, 2022

Leland Town Center Lands New Tenant; Lowe’s Begins Construction

Johanna F. Still - Aug 10, 2022

Pipeline Poke Headed To Autumn Hall

Elizabeth White - Aug 10, 2022

Rachael Ray, Emeril Lagasse To Appear At GLOW Event

Justin Williams Pope - Aug 10, 2022

New Biz Creations In Cape Fear Region Continue Strong Trend

Johanna F. Still - Aug 9, 2022

In The Current Issue

Beach Equipment Rentals Sizzle

For some beachgoers, their perfect day is lazing on the shore, soaking up rays. For others, it’s water sports or maybe biking alongside the...


Stacking The (parking) Deck

The amount and cost of parking in urban settings is a ubiquitous topic, particularly in growing cities like Wilmington, where not everyone a...


Film On Rebound; New Horse Enters Race

New soundstages in Wilmington are set to be constructed toward the end of the year – marking activity that appears hasn’t happened since the...

Book On Business

The 2022 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Trying to Grow a Business?
2020 Health Care Heroes
2020 WilmingtonBiz 100