Is a Recession Coming and What Should You Do About It?
Inflation is on everyone’s mind – we are all feeling a strain in our bank accounts and are hoping for some relief. On Friday, May’s consumer inflation report is scheduled to be released. We expect year-over-year inflation to be around 8.3%, which is consistent with April’s inflation rate. This isn’t great news, but at least it hasn’t gotten worse.
There won’t be any speeches from FED policymakers this week since they have a “blackout” period before their monetary policy meeting. This silence may feel like “the calm before the storm” and could contribute to uneasy feelings and tension in the market this week.
The “calm” may be disrupted if Friday’s inflation report comes out above or below market expectations.
The market expects the Fed to increase short-term interest rates by 0.5% at their monetary policy next week. We will watch closely to see if the odds change toward a more aggressive stance after Friday’s inflation report.
How’s The Housing Market?
Inventory is finally growing, which means that home values should start to come down a bit. We do not think this will cause a crash by any means, but we do believe that we will lose the gains we received in 2021.
Sellers may not like this news since they’ve been enjoying record high sales prices. However, the rapid growth of the real estate market can’t continue since wage growth is non-existent. In fact, wage growth is moving backward, which means it is unrealistic to think the housing market can continue to grow at the pace it has been the last two years.
Is a Recession Coming?
I hate to be the bearer of bad news, but we are already in a recession. Quarter 1 of the year had a decline in GDP. After Q2 ends, we will still be in a decline, and the media will announce a recession. Once this happens, expect the stock market to continue its downward movement.
The recent drop in the stock market that completely wiped out 2021’s gains is only the beginning. We anticipate the market to drop even further. To minimize losses, your long-term investments should be in cash. This way, you won’t lose any more money as the stock market drops, and you can enter once again when we are in an upward growth period.
What Should You Do About It?
If you haven’t done so already, lock in your interest rate. Since we expect rates to rise, you want to make sure that you are protecting yourself from that additional expense. If you lock in a rate today, it will be good for 30 to 60 days. Since inventory is rising, you should have better chances of finding a home that works for you during that time.
As always, if you have any questions, please give us a call.