An Economic Downturn:
In October, Confidence in the U.S. Economy experienced a decline, primarily attributed to concerns regarding persistent inflation, ongoing political tension in Washington, the potential for a U.S. economic downturn and the war in Israel. The Conference Board’s Consumer Confidence Index registered a decrease from an upward revised 104.3 in September in 102.6. Notably, this widely monitored index surpassed expectations, with a consensus estimate from Dow Jones projecting a value of 100
Furthermore, the board’s expectations index, which assesses consumers’ outlook for income, business prospects, and labor conditions over the next six months, continued to signal the possibility of a recession within the coming year. It decreased to 75.6 in October, down from 76.4 in September. Historically, any reading below 80 on this index has foreshadowed an impending recession within the subsequent year.
It is important to note that while some economists have asserted that recession risks have significantly diminished this year, the economy has displayed robust growth, evidenced by a 4.9% increase in U.S. Gross Domestic Product during the third quarter. Nevertheless, several economists also believe that this exceptional growth may not be sustained into the fourth quarter.
The recent announcement by the Treasury Department, disclosing a fiscal year 2023 deficit of 1.7 trillion dollars, was a stark reminder of the situation’s gravity. The latest Treasury data projections now indicate borrowing of 1.6 trillion in just the first half of fiscal year 2024. This alarming acceleration in borrowing, nearly equivalent to the entire previous year’s amount in just six months, signifies a near doubling of the deficit. Consequently, the Treasury is on course to borrow over $3 trillion this fiscal year, a 50 percent increase over previous Congressional Budget Office estimates.
It is noteworthy that, aside from the extraordinary financial challenges of the pandemic in 2020, the United States has never experienced deficits of the magnitude seen in the last, current, or forthcoming quarters—amounting to $1 trillion, $76 billion, and $816 billion, respectively. In contrast, the four quarters preceding the pandemic witnessed an average deficit of less than $300 billion, about half to one-third of the present levels.
“Consumer fears of an impending recession remain elevated, consistent with the short and shallow economic contraction we anticipate for the first half of 2024,” the Conference Board report said. The board’s present situation index, which is based on consumers’ assessment of current business and labor market conditions, fell to 143.1 from 146.2 last month.
“Consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular,” said Dana Peterson, chief economist at The Conference Board. “Consumers also expressed concerns about the political situation and higher interest rates. Worries around the war and conflicts also rose, amid the recent turmoil in the Middle East.”
Inflation has declined precipitously since hitting a peak of over 9% in June 2022, but it’s still 3.7% as measured by the consumer price index. That’s well above the Federal Reserve’s target of 2%.
During economic downturns, businesses experience reduced sales, and overall economy’s growth stagnates or even contracts. To mitigate escalating expenses, organizations may find themselves compelled to implement substantial workforce reductions, leading to widespread unemployment. Simultaneously, the hiring process decelerates, making it challenging for those who have lost their jobs to secure new employment opportunities.
Investments such as stocks and real estate tend to devalue during these periods, resulting in potential setbacks for retirement and other savings accounts. Lenders may also respond to heightened financial uncertainty by tightening their lending criteria, rendering it more challenging for individuals to qualify for new credit lines. While the exact timing and complete ramifications of a recession remain uncertain, it is wise to prepare for the inevitabilities.
Increase your emergency funds in the case of a financial or job loss. One of the hardest parts of a recession is not knowing what will come next, and when things will get better. Be clear about where you stand financially. Ask yourself these key questions as you take stock of your financial situation. How much cash do I have on hand? How much cash can I get my hands on quickly, if I need it? How much debt do I currently have? What are my basic monthly living expenses? Understand what you’re doing today and anticipate your needs over the next six months. If you’re well-prepared for a recession, a job loss or other financial hurdle, you’ll have an emergency fund that covers three to six months of living expenses.
An investment portfolio review is an assessment of your financial portfolio to evaluate whether it’s aligned with your financial goals, risk tolerance, and tax efficiency objectives. It involves analyzing your asset allocation, diversification, risk exposure, management expenses, ownership costs, and tax strategies. The primary objective of an investment portfolio review is to ensure that your portfolio is well-positioned to achieve your long-term financial goals while minimizing risk during tough economic times. Market volatility and short-term fluctuations can tempt investors to make emotional investment decisions that can harm their long-term financial prospects.
LOOK AT PRECIOUS METALS AS AN ALTERNATIVE INVESTMENT
Exploring investments beyond the realm of conventional stocks, bonds and commodities, such as gold and silver, offers the potential for reduced volatility among investors. Additionally, it’s conceivable that the performance of these alternative assets might surpass the higher costs associated with traditional investments. Throughout history, precious metals have earned a reputation as a valuable hedge against inflation during challenging economic times, as they tend to maintain their value over the long term, even during economic fluctuations and on the brink of a recession.
For a comprehensive discussion about your current financial situation and strategies to safeguard your assets for the future, we encourage you to reach out to the Reagan Gold Group.
Contact Reagan Gold Group today to gain a deeper understanding of how physical gold and silver can provide balance to your investment portfolio, well in advance of any severe economic downturns. Book a FREE consultation to get started. Contact Reagan Gold Group today to find out how to take ownership of your own wealth. Your Wealth, Your Rules.
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