Recession 2022: Prepare your Finances for Any Scenario

Between the rising gas prices and the conflict in Ukraine, even the most optimistic among us are feeling a bit of anxiety. Recent stock market volatility has contributed to the worries. Spokespeople in the media have begun to talk about entering bear market territory. Has the Fed done so much to combat inflation that the economy is headed into Recession 2022 instead?

It is true that the U.S. has successfully produced economic rebounds in the recent years, and not everyone is saying that the economic downturn is imminent.

And yet, given the natural economic cycles, a recession is bound to happen sooner or later. Planning for a possible economic downturn and market turbulence is a wise part of any financial plan.

Recession 2022 Talk: How Worried Should You Be?

First and foremost, don’t worry about something that is not here yet. No matter how many people are standing on the soapbox and shouting doomsday predictions, panic is rarely helpful.

Even if Recession 2022 were to arrive, know that you’ve been here before. We had a brief stint with a recession just two years ago in 2020, and another recession back in 2008 that lasted a year and a half”. The recession lasted 18 months from peak to trough (Dec 2007 – June 2009). Recessions are a normal part of a cyclical economy.

The market volatility that we are experiencing right now may be unsettling to watch — but it is not unusual. For investors with an appropriately diversified portfolio, it’s likely that the recent market drop will be a blip in their long-term investing plan.

However, we know that it can be hard to sit on your hands while markets go bump. So, here are a few things to check and do as we ride out this turbulence and face whatever comes next.

Revisit Your Financial Plan

A balanced, diversified portfolio can be a beautiful thing — but only if it’s backed by a holistic plan that accounts for your personal situation, goals, and timelines. After all, investments are merely a bridge that connects your savings today with the lifestyle you hope to enjoy in the future.

So, dust off that financial plan and schedule a call or a meeting with your advisor. Even the best plan needs periodic updates, especially in this day and age when life changes come fast and furious. Maybe you have a new financial goal, or perhaps your income has changed recently. Some people may have discovered that their appetite for risk is a bit lower than they had anticipated back in the happy days of rising S&P 500 and Dow Jones. All those observations, discoveries, and changes are good reasons to review your projections and double-check that you remain on track.

Resist the Urge to Sell

It is easy to lose your cool when the stock market chart begins to look like a roller coaster. An economic downturn often forces companies to limit their hiring, expansion, and investing — which can lead to some scary narratives of Recession 2022 in the media.

However, selling your investments in a panic is precisely the wrong thing to do.

The exact course of action will depend on your personal situation, and most people would benefit from a conversation with an expert financial advisor.

Generally speaking, those who are planning to retire in the next few years may wish to keep a portion of their savings in an account that likely won’t fluctuate wildly. However, most people would benefit from retaining some exposure to the stock market, especially in the face of the inflation we have witnessed recently. If you are still working, keep making those 401(k) contributions — and consider rebalancing the investments in your taxable accounts to take advantage of those tax savings.

Don’t Try to Time the Market

This is worth repeating over and over, even as experts in the media begin to confidently “call the bottom”. No matter how many indicators and signs you study, it is nearly impossible to accurately predict when the market will hit its lowest point — or, on the opposite side, when the market hits its peak.

What matters most is the time your money spends in the market. Historically speaking, bear markets don’t last forever. They turn into hopeful, growing bull markets. When you are invested, you get to benefit from that growth. In the long run, staying invested through the turbulence can be healthier for your portfolio — and can help you accumulate greater wealth over your lifetime.

Prepare Your Finances for Any Scenario

Most people don’t enjoy thinking about the possibility of a recession and a bear market. However, both are a natural part of our economy. As news cycles come and go, it is important to remind yourself about your long-term goals — and to partner with an experienced financial advisor.

With a proper financial plan, a diversified portfolio that’s appropriate for your purposes, and a knowledgeable ear to hear your worries and help you chart your path forward, you will be well-positioned for whatever comes next. Reach out to a member of our SYM Financial team to schedule a call today!