As of July 28, 2022, the U.S. GDP shrunk for the second quarter by 0.9%, indicating a recession. The inverted curve of U.S. 10-year treasury bonds also suggests a downturn in the economy. Thus, navigating these troubled waters is not going to be easy, and since every recession is different, no one solution will benefit an individual. However, not all is lost, and certain smart decisions can help individuals dodge at least some harmful currents.
"Be fearful when others are greedy and greedy when others are fearful." - Warren Buffet
With a market downturn, stocks are plummeting in value and are reducing to less crazy valuations. When $2.5 trillion of stimulus checks were printed, many more individuals had the spending power to participate in both the stock and cryptocurrency markets. A recession will result in a decimation of the stimulus money injected into the economy.
With that being said, individuals need to think about long-term gains, let the market average returns be their benefactor, and ride the current bear market.
As r/wallstreetbets say, 'Diamonds hands' (💎🤲)
In such times, consumer spending will need to reduce. It's now time to save up. As per the Fed's July reports, inflation hit 9.1%. Inflation of around 2-3% is a good indicator of a healthy economy. But with inflation currently at 9.1%, the economy needs to push the brakes, and the Fed is doing so by increasing interest rates. The Fed, earlier this year, announced that it would hike rates seven times this year, and as of July 27, the Fed hiked it for the 4th time this year, and every hike sends tumultuous waves to both public and private markets.
Data from the Federal Reserve Bank of New York show that credit card balances grew 13% yearly, the most significant jump since 2002. According to New York Fed researchers, that increase can be partially attributed to consumers struggling with rising prices, and Americans collectively responded, "Not now, maybe next month."
Credit card usage among a younger audience has seen a massive surge. The balances of Americans 25 and younger jumped 30% in Q2, and people with credit scores below 660 saw a spike of about 25%.
Although we are not in the deep trenches yet, we can see symptoms of an underlying and disastrous recession. Many public companies, such as Peloton, Coinbase, etc., are now worth less than their last stage funding round and are down from their all-time highs. Many companies are also slowing down hiring, many are freezing hiring, and some are laying off like never before. Public and private markets are adjusting slowly and trying to steer to safety, and it's high time individuals take action. Every day individuals need to start new side hustles and have additional passive income sources. As per the latest jobs report on August 2, 2022, 10.7 million job openings are still open. People need to get to work. Doing so is one sure way to cushion the economic blow.
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