Authored by Russ Jones via The Epoch Times (emphasis ours),
Monday saw a sharp decline in stocks as investors worldwide felt the impacts of last week’s dismal jobs report, which increased fears of a potential recession.
The weaker-than-expected jobs report triggered the market meltdown.
U.S. Bureau of Labor Statistics data showed that employers hired 114,000 workers last month, far less than the bureau’s projections of 185,000 jobs. Meanwhile, the unemployment rate has increased to 4.3 percent reaching its highest point since October 2021.
Japan’s main Nikkei 225 stock index experienced a dramatic decline of more than 12 percent, marking its worst trading day since the Black Monday crash of 1987.
This significant drop reflects broader concerns about the global economy and has contributed to the overall market turmoil. Financial analysts say these are indicators that a recession, if not a depression, is possible.
On Sunday, Goldman Sachs economists increased the likelihood of a U.S. recession from 15 percent to 25 percent in the upcoming year.
The Epoch Times talked with several financial experts who provided tips on navigating a potential recession.
They suggested that individuals can better navigate economic downturns by diversifying investments, building an emergency fund, paying down high-interest debt, and maintaining a long-term focus. Also, avoiding risky financial behaviors and ensuring adequate insurance coverage will protect your financial well-being during uncertain times.
Be Informed About Global and Domestic Financial Affairs
Evaluating your financial situation in relation to the economic markets is crucial in preparing for a recession, said Bill Dendy, a seasoned financial strategist and founder of Alicorn Investment Management, Inc., based in Dallas, Texas.
He also advised that people should consider the stability of their jobs and industries—if you risk losing your job, start looking for additional income sources and update your resume.
Dendy told The Epoch Times that many factors constantly affect the financial markets—and currently the potential of war between Israel and Iran, a low jobs report, and the November election are all playing a role.
In times of economic downturn, Dendy suggests paying attention to what you can control, such as prioritizing essential costs and cutting back on non-essential spending.
“Keeping abreast of economic trends and being prepared to adjust financial strategies is vital,” Dendy said. “Individuals must create and adhere to a strict budget to help manage expenses more effectively.”
An example of financial awareness can be seen in the recent move by billionaire Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, he said.
Berkshire Hathaway recently sold nearly half of its stake in Apple, reducing its holding to $84.2 billion by the end of the second quarter. This move is notable given Apple’s status prior as Berkshire’s most significant stock investment. The sale has meant an increase in the company’s cash hoard to a record $276.94 billion.
“It’s critical to keep an eye on the markets,” Dendy said. “The window for fixed-income investors may be closing. Most of all, talk with an advisor.”
Diversify Investments
Christian Briggs, CEO of Hard Asset Management Inc., offers specialized investment advice on hard assets, particularly rare coins and precious metals. Briggs told The Epoch Times that investing in rare coins and precious metals is seen as a way to preserve wealth, especially during economic downturns.
Since 1974, gold has experienced significant returns and wealth development.
Briggs observes that gold values increase during high inflation administrations.
Diversification is also a crucial strategy to mitigate risk during a recession. Briggs contends that a recession started months ago and advises spreading investments across various asset classes, including hard assets, to protect against market fluctuations. This approach ensures that not all investments are affected by the same economic factors, reducing overall risk.
“Keep cash on hand to cover living expenses and avoid dipping into investments during unemployment or financial strain periods,” Biggs said. “Liquidity provides a safety net and allows for greater financial flexibility.”
Briggs maintains that the middle class is suffering as a result of inflation. He adds that inflation, taxation, and devaluation are the result of socialist approaches to economic management that he views as destructive to society.
“The market doesn’t like that or big taxes, so the dollar is weakening, and we’re seeing a severe recession. People need to have low debt and invest in high asset values,” Briggs said.
Increase Emergency Savings
Research by Congrong Ouyang, an assistant professor in the Department of Personal Financial Planning at Kansas State University, indicates that understanding and managing financial obligations is crucial for maintaining financial well-being during recessions.
Ouyang has extensively researched consumer behaviors and household financial well-being, particularly during economic downturns like recessions.
“With high inflation rates on groceries and general household items, it’s important to access monthly expenses,” Ms. Ouyang said. “Three to six months of savings used to be the standard, but I think more than that is prudent in this economy.”
Ouyang suggests investing the funds in a high-yield savings account saying that these accounts offer significantly higher interest rates than traditional savings accounts, up to ten to 12 times the national average, providing a better return on savings.
High-yield savings are low-risk investments because they do not fluctuate with the market like stocks or bonds. This stability makes them a good option for preserving capital, she said.
“Getting your debt below 35 percent of your average income is always a good plan. It not only helps your credit score but it reduces your stress,” Ouyang added.
Some may embrace a “why bother” attitude and develop out-of-control spending habits during a recession but Ouyang advises against that approach.
“The financial condition of the average household is essential to maintaining a sense of well-being. The consequences of debt are significant. People need to either spend less or earn more.”
Pay Down High-Interest Debt First
In general, recession preparation involves proactive financial planning, debt management, and prudent investment strategies.
To reduce financial strain during a recession, Dendy suggested Americans focus on paying off high-interest debt, such as credit card balances, and use balance transfer credit cards or consolidation loans to lower interest rates and streamline repayments.
Dendy emphasizes the importance of focusing on paying down high-interest debt first.
This includes credit card debt, personal loans, and other forms of borrowing with high interest rates. Reducing these liabilities can significantly improve your financial stability and free up cash flow for savings and investments.
Dendy recommends the “avalanche method” for tackling multiple debts. This method involves listing all loans in order of highest to lowest interest rate, making the minimum repayment for each loan, and then directing any remaining funds to make aggressive repayments on the loan with the highest interest rate—working down the list over time. This approach gains a quick win and builds momentum.
Most advisors agree that keeping a portion of assets in liquid form, such as cash or high-yield savings accounts, ensures quick access to funds in case of emergencies, especially during recessions.
“I suggest you be proactive,” Briggs said. “We have a global banking problem. You don’t have to be proven right to then wait to be right to do something. If you balance a portfolio, you must pivot with the markets.
“You can pivot out of one asset class to another,” he said.
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