Broker Check

Recession 2023

January 10, 2023

As you probably know, there is a lot of uncertainty about our economy today. Many economists have discussed the possibility of a recession in the near future, and given the volatility in the markets, many investors see the possibility, too.

The argument for a recession is simple: Higher inflation leads to higher interest rates. Higher interest rates often lead to an economic slowdown, as people and businesses borrow less and, by extension, spend less. This, in turn, can cause a spike in unemployment.

Now, I don’t have a crystal ball. I can’t say for certain whether we will have a recession this year or not. But, as your financial advisor, my job isn’t to predict the future but to help you prepare for it.

Generally speaking, there are four things all investors should review and potentially adjust before a recession hits. They are:

  1. Your diversification. Is your portfolio overly vulnerable to an economic downturn?
  2. Your risk tolerance. Are you taking on too much risk, especially in a high-interest-rate environment?
  3. Your cash flow. How could a recession impact your income, especially in retirement?
  4. Your debt. How might rising interest rates affect your ability to pay off your mortgage, auto loan, or credit cards?

The good news is that we have already reviewed your portfolio, your financial plan, and our investment strategy. While economic downturns are never fun, we are confident about your long-term future, recession or not.

That said, however, I’m conscious of the possibility that there are other areas of your financial life that I may not know about. Whether they’re new goals you want to achieve, outstanding expenses we’ve never had the chance to discuss, or, most importantly, investment assets held at other firms or institutions. If you discover areas of concern that need to be discussed, please reach out to Tina and me.

That’s the reason I’m sending you this email. I want to ensure that every aspect of your finances has been accounted for when it comes to preparing you and your family for a possible recession. With that in mind, I want you to think about other areas of your financial life that may need attention. By reviewing any outside assets you have, along with your goals and your exposure to higher interest rates, we can do what needs to be done now rather than waiting until a recession actually hits. We can plan for the future before the future becomes the present.

In the military, there’s a rule of thumb that goes, “Prior proper planning prevents poor performance.” By taking steps in advance to prepare for a possible recession, we can work to mitigate its effects on both your portfolio and your finances in general.

As always, thank you for the trust you’ve placed in us. Here’s to a great New Year!

P.S. If you know anyone who is worried about an upcoming recession, please feel free to let me know.  I’m always happy to help any friends or family members you have who need it. Thanks!