Are we in a recession?
Depends on who you ask.
That's a little perplexing, isn't it?
Let's talk about it.
A recession is typically defined as two consecutive quarters of negative growth.
The economy met that criterion following the most recent Gross Domestic Product report, which revealed that the economy shrank in the first half of 2022.
Isn't it a recession if it looks like a duck and quacks like a duck? We won't know for several months whether we're in a recession. Why?
The National Bureau of Economic Research (NBER) is the official arbiter of recessions, and their recession criteria are based on a lot more data than just GDP.
The NBER looks for a significant and widespread decline in economic activity that lasts for a period of time before formally declaring a recession.
We could be in the midst of a recession. However, a confluence of positive and negative economic factors makes it strange and hazy. On the plus side, the labor market remains strong, with plenty of new jobs being created. Consumer and business investment are also looking strong. On the negative side, everyone is obviously concerned about inflation, as is the Fed's latest interest rate hike.
So, does it really matter whether or not we're "officially" in a recession?
This is also dependent on who you ask. Knowing that we are in a recession has significant symbolic value.
Policymakers are wary of making an announcement too soon. As a result of panicked markets, businesses, and consumers, it may become a self-fulfilling prophecy.
A number of Wall Street economists believe that we are not currently in a recession; however, many have warned that a downturn is possible. Bottom line: The reality of what we're seeing is more important than official recession forecasts, and it's not looking good.
What does all this mean for me?
Whether we're officially in a recession or not, the economy is flashing some undeniable warning signs.
Despite recent gains, we can definitely expect more market volatility and selling pressure.
The good news? This isn’t a surprise to anyone. Right now, the best we can do is stick to the strategy, take advantage of the opportunities we see, and mentally prepare for a rocky road ahead. Vigilantly,