Are your investments prepared for a recession? After 34 years as a Tulsa-based wealth manager, I have learned that I certainly cannot predict the future and that most economists fail mightily with their economic projections.
Nevertheless, during my entire career, every time short-term interest rates have vaulted past long-term interest rates, like a pole vaulter surging higher to a new personal best, the economy has limped into a recession when the Leading Economic Indicators have also been falling for over a year.
I hope economic history doesn’t repeat itself, but our national economic leaders are not doing what is necessary to balance supply and demand pressures to whip the inflation that is hurting so many American pocketbooks.
Interest rates have gone higher than even I expected, and the Federal Reserve hasn’t learned from the lessons of the past when they burned out economic growth by raising rates more than necessary. Consumers and businesses are facing higher and higher financing costs, which will slow down purchasing and investment eventually.
Typically, the best asset class for recession diversification is bonds. Now, that doesn’t mean it is time to dump good quality, long-term stock positions, but it is a good time to check in with your financial advisor about your overall diversification strategy and potential hedging against shorter-term recession risks.