Economic Outlook: Guiding Clients Between Soft Landing and Mild Recession
After more than a year of pessimistic forecasts for the U.S. economy, some experts have abandoned recession forecasts and embraced the Federal Reserve’s gentle landing strategy.
These changes have prompted discussions between financial advisors and their clients, who may have varying degrees of optimism regarding the nation’s economic outlook.
High inflation and the Fed’s plans to combat it, including a series of interest rate increases aimed at bringing inflation down to its 2% target, were the primary causes of recession forecasts.
According to Boneparth, who is president of Bone Fide Wealth and a member of CNBC’s Financial Advisor Council, data such as the robust labor market and declining inflation do not indicate the predicted economic downturn.
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Navigating Investment Amid Recession Uncertainty
The U.S. Bureau of Labor Statistics reported annual inflation fell to 3% in June, and the U.S. Labor Department reported the unemployment rate in July was 3.5%, just above the lowest level since 1969.
As recessions are notoriously challenging to forecast, even for economists, financial advisors have warned clients towards making choices regarding investments out of fear. In the next twelve months, recession is highly unlikely.
Two consecutive quarters of negative gross domestic product (GDP) is one definition of a U.S. recession, which occurred in the first two quarters of 2022. Successive quarters have been favorable.
The National Bureau of Economic Research, which identifies the beginning and conclusion of economic downturns, has not labeled the 2022 downturn a recession, according to Atlanta-based CFP Ted Jenkin, founder of oXYGen Financial.
Nonetheless, some clients are concerned about the economic effects of the September expiration of the student loan payment moratorium, as well as soaring auto loans and record-high credit card debt, he said.
Regardless of whether the economy will experience a mild recession or a gentle landing, experts stress the importance of ongoing client education.
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Source: CNBC