In 2023, investors and economists are concerned about the possibility of a recession caused by rising interest rates, high inflation, and geopolitical tensions.
There is no need to be alarmed about recessions as they are a normal part of an economic cycle.
But as an insurance expert in Glendale, CA, our goal is to help our clients understand the risks and prepare for the possibility of a recession. We list the key risk factors in a recession so you can begin your preparations.
2023 Recession Risk Factors
There is a looming recession in 2023, and investors should understand the risk factors to prepare for the worst. The next recession may be triggered or contributed to by two major risk factors: inflation and higher interest rates. Interest rate hikes have been the Federal Reserve’s response to inflation, but this move has also resulted in higher interest rates, putting additional pressure on the economy.
In June 2022, the consumer price index reached 9.1%, its highest reading in over 40 years; however, the latest reading of 7.7% showed a slight improvement. However, this is still above the Federal Reserve’s long-term target of 2%, indicating the possibility of further increases in interest rates in the near future.
As a result of the ongoing conflict between Russia and Ukraine, uncertainty in the global energy market has increased, making a shock in gas and oil prices a significant risk to the already fragile U.S. economy. As a result of these risks, it is important to consider insurance solutions in Glendale CA in order to protect your assets.
Will There Be a Recession in 2023?
Now that it’s 2023, investors and economists are closely monitoring the U.S. economy for signs of a possible recession. Inflation and rising interest rates are two key factors that may contribute to an economic slowdown. However, there are differing opinions among economists on the likelihood of a recession and its impact on the economy.
As the Federal Reserve continues to raise interest rates, Bank of America chief U.S. economist Michael Gapen predicts that the U.S. will enter a mild recession in the first three quarters of 2023. On the other hand, Goldman Sachs chief economist Jan Hatzius believes the U.S. will narrowly avoid a recession in 2023, as real disposable income is forecast to grow by at least 3%.
Whether you are an investor looking to protect your assets or a business owner preparing for economic headwinds, it is essential to stay informed about the latest economic trends and seek the advice of a trusted financial services firm.
Investment Strategies During Recession
Investing during a recession can be challenging, but there are strategies that can assist investors.
In light of the possibility of a recession in 2023, investors may wish to consider reducing their exposure to volatile stocks and increasing their cash holdings.
This not only reduces market risk, but also provides financial flexibility if a recession creates potential buying opportunities in 2023. Moreover, online savings accounts currently offer interest rates of 3% or higher, and these rates are expected to rise if the Fed hikes rates.
Historically, value stocks have outperformed growth stocks during periods of elevated interest rates. Higher interest rates can harm companies’ discounted cash flow valuations, which can negatively impact high-growth stocks. On the other hand, certain stocks and market sectors tend to perform better during recessions. Stocks in utilities, health care, and consumer staples, for instance, tend to have earnings that are not affected by economic cycles or fluctuations in consumer confidence.
According to U.S. investment analysts, investors should prepare their portfolios for the next economic cycle, which could occur in 2024 and beyond. You might benefit from looking ahead to the next cycle when it comes to your portfolio since markets always look ahead.
Secure Your Financial Future Today
Discover the peace of mind that comes with expert financial planning by choosing RMR Insurance Solutions as your trusted financial service company in Glendale, CA. Our team of experienced advisors is dedicated to providing personalized service and long-term insurance care to help you reach your financial goals.
Whether you’re looking to secure your retirement, protect your assets, or plan for your future, RMR Insurance Solutions is here to help. Don’t wait any longer to take control of your financial future, contact us today for a consultation by calling (818) 326-9358.
