Recession Indicators are Rising

Hey folks, I’m Colin Richards, president and founder of Lord and Richards. I'm proud to lead a team of investment advisors that help people like you to be able to retire financially independent from a biblical point of view.

?

I’m talking about a critical topic today; recession indicators continue to rise here in America. I feel we've been in a recession in many sectors of our economy. Just because we haven't quite met the technical mathematical definition yet does not mean that we aren't already beginning to see a recession in our economy. People are out of work, the cost of goods is high, and people's lifestyles are being negatively impacted.

?

I have a few concepts I want to share with you. I want to make sure you understand the state of things and how to prepare. Just recently, we had an interview with former Treasury Secretary Larry Summers, who was under the Clinton and Obama administration. He gave his take on what is happening now, particularly with interest rates and inflation.

?

He feels there is no question that the current trajectory of interest rates is not bringing us on that secure sloping path down towards 2% inflation, which the Fed has set as the target. He indicated that historically soft landings like we’ve been hoping we can raise gradually to are very hard to attain. When inflation is high, that ideal soft landing is hard to manufacture.

?

With the Fed’s current benchmark set on rates, Summers sees rates rising another half point to one and a half points, to land somewhere between 5-6%. We likely have a lot of rate increases still to come and we will continue to see problems in our markets because the markets react negatively every time the Fed raises rates.

?

If you don't have a clear written plan for protection in your portfolio, this is the time to get it in place. A day after Summers’ interview, Fed Chairman Jerome Powell stressed that the central bank policymakers are prepared to raise interest rates higher than previously expected. Brace yourself because interest rates are not only going higher, but they’re picking up the pace.

?

Recession indicators are rising. Why do I say that? Let’s look at hiring, one of the big areas of the economy. Companies have relied on large cash stores they've built up, including federal stimulus money, to avoid layoffs as long as possible. As a business owner, I know hiring people is expensive, releasing people is expensive, and hiring people again is expensive. Those processes quickly drain cash. A series of layoffs is in nobody's best interest. Companies are holding on as long as they can, but sometimes they have no choice.

?

In the next segment, we will talk about home sellers and how they've also been holding on as long as possible, but we're reaching a tipping point. Layoffs will increase, and we're already seeing that in the tech and mortgage sectors.

?

Treasury Secretary Larry Summers said his best advice is to hope for the best but plan for the worst. When a treasury secretary says his best advice for people right now is to hope for the best but plan for the worst, you know you better start planning.

?

Are you naked in the market right now? Have you assumed that all was going to be well? Did you swing in the other direction and retreat entirely to the sidelines with your cash? Neither of those extremes is a great option. Your choices are not only to either put your money out there at risk or stick it in cash and wait for the sun to shine.

?

If you stick your money in cash and wait for the sun to shine, odds are you won't time the reentry right. You may think you’re a wizard of Wall Street, but very few people can accurately time when to take money out and when to put it back in.

?

On the other side, just putting your head in the sand and trying to weather the storm reminds me of the military dentistry that I grew up with. Growing up in an Air Force home, I remember going in to get my teeth taken care of. I had meningitis as a small child and one of my teeth was very damaged before it even came through the gum. I went in as a teenager to get a crown, but the dentist discovered that they could not numb that tooth. Their advice to me was, “hold on.” I won't repeat the sounds that came after that, but let's just say I have never forgotten that experience. Some of you remember what it's like to hold on during market downturns in 2020-2022, 2008, and even 2000, but holding on is not the best advice.

?

What is the best advice? The best advice is a written risk management plan, which is part of the financial independence review we do for every client we meet with. As we look at these markets, I'm not sure which way they're going. I sure hope they'll go up. I want everybody to prosper, but the worst thing to do would be to slip on some rose-colored glasses and fail to have a written plan. A written plan puts together investments with future goals and develops a rock-solid strategy for not repeating the mistakes of the past. I’d love to help you.

?

The Conference Board recently came out with a survey that only 93% of CEOs are readying themselves for recession. Let me ask you a question. Are you ready? Is your portfolio able to weather any storm? Do you have a plan in place so that if the market and economy go down, you are prepared to deal with it and prosper? At Lord and Richards, we help you prosper through both good times and bad. I'd love to talk to you about how exactly you can do that. The delightful process starts with a simple phone call.