Discussing if we're in a recession and what data to keep an eye on
July 19, 2022
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Jake Sanders, and I am a partner at Wealth E&P and operate as a Wealth Advisor and Certified Financial Planner. I hope that everyone is having a great week so far.
I wanted to start today by posing a question: are we potentially already in a recession? The answer really depends on how you define a recession. Most people, a little bit erroneously, specifically point to Gross Domestic Product (GDP) and GDP growth and whether or not we have had two consecutive quarters of declining GDP. Now, this answer is a little bit too simplistic. A recession is actually defined by the National Bureau of Economic Research (NBER), and in their own words, they say that a recession is a significant decline in economic activity that lasts more than a few months. What do they look at, among other things, in these economic output areas?
They specifically look at non-farm employment and real personal incomes; in other words, they look at jobs and wages. Even though GDP has been declining, we do have a period where both of those areas are actually still pretty strong. This could soften in the months to come, and there is evidence that it already is, so we could see that change here shortly. However, there is a divergence in GDP and the metrics that the NBER uses to define a recession.
So, why does it matter? What is the point? I could argue here that a recession potentially has already been priced into the stock market, at least in large part. What does that mean for your portfolio and how we're managing it here at Wealth E&P? We're following our indicators as always, and they have been and continue to be in a very defensive position depending on where you are in your personal portfolio.
If you have any questions about any of this, we would love to hear from you. If you have any other questions for us about your portfolio, financial situation, or retirement, please feel free to reach out, visit www.wealthep.com, or give us a call at (678)-739-0175. Otherwise, stay tuned for our Market Minute next week! We hope you all have a great week.
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