From the war in Ukraine to increased interest rates and steep prices at the pump, some economists believe a recession is imminent.
Even if a recession is inevitable, it's important to look at all the factors, including what to do if one should occur.
In March, the federal open market committee indicated officials were close to approving a 50-basis-point rate hike but settled on 25 points due to uncertainty around the war in Ukraine. Many believe the next round will be closer to that 50-basis-point hike come may, leading Deutsche Bank to be the first bank to predict a market recession.
But what exactly does that mean?
"A recession is 2 quarters of negative Gross Domestic Product. So if our GDP declines slightly instead of having a 2% growth per quarter all of sudden we are declining even by half a percent, that's considered a negative GDP, happens twice in a row and then there we are," said President of American Wealth Management Laif Meidell.
The other factor that some economists are looking at is the interest rate paid by bonds, which historically is higher the longer the bond term is. However, we are seeing signs of an inverted yield curve, where a 5-year bond pays out more than a 10-year, which is what happened briefly this week. An inverted yield curve, when rates have converged has predicted 5 of the last 6 recessions or economic difficulties, but it's important that we don't just look at one factor when talking about potential recessions.
“To have the best perspective, don't take any one indicator as a solo performer, take many indicators in a chorus such as the ISM manufacturing index, which right now is at 57.1," said Meidell, who goes on to say that any number for the manufacturing index above 50 is a sign of the economy in an expansion. When you look at the jobless claims, which are sitting at just 166,000 - the lowest we have seen since 1968 - this also leads one away from the recession scare.
We are also seeing lower prices for a barrel of oil than we saw a month ago.
“We are not going to see the reflection of that decline at the pump yet, because we still have this inventory that has been purchased at higher rates,” said Meidell.
He tells us there are things investors can proactively do right now.
"I think investors need to take a hard look at what they own and be more selective in what they own. And so that means today shorter-term interest rates on their bonds. The areas of the market that do better during a late-market cycle are things like materials, energy does better, health care does better, utilities do better, staples."
