There is Hope for the Economy – Wolves And Finance

There has been so much negative news about the economy lately. In all this chaos, there is an important message that gets lost: That there is still hope for the economy.

Truth Social: https://truthsocial.com/@FinanceWolves

SOURCES:

CNBC – Jamie Dimon warnings https://www.cnbc.com/2022/10/10/jpmorgan-jamie-dimon-warns-us-likely-to-tip-into-recession-soon.html

KPMG CEO Outlook Report https://assets.kpmg/content/dam/kpmg/xx/pdf/2022/10/ceo-outlook-report.pdf

Wallstreet Journal – Inverted Yield Curve

https://www.wsj.com/articles/yield-curve-inversion-reaches-new-extremes-11669687278

Housing Prices

https://www.bankrate.com/real-estate/housing-prices-falling-across-country/

Housing Prices Dropping

Housing Market Update: Pending Home Sales Fall 35%, Largest Drop in at Least Seven Years

Wallstreet Journal – Tech layoffs

https://www.wsj.com/story/from-twitter-to-meta-tech-layoffs-by-the-numbers-0afd8714

VIDEO SUMMARY

JP Morgan CEO Jamie Dimon has been vocal that he expects a recession in 2023.

KPMG’s latest CEO outlook report says that 86% of CEOs predict a recession in 2023.

Perhaps the biggest warning sign is that this week the Yield curve for US Treasuries inverted, reaching the largest negative gap since 1981. You can see from this chart that recessions are marked in grey, and the yield curve historically dips below zero right before a recession.

On this channel, I have also covered a lot of negative news about the economy and the struggles ahead. However, in all this negative coverage, there is a message that often gets overlooked. It is easy to fall into a trap of looking at the economy as black or white. Either the economy is good or it is bad. But I think there is a different perspective that is more accurate and helpful. Changes in the economy are a matter of degree. The economy is not good or bad, it is either getting better or worse, but usually by small amounts. So while I may explain on this channel that a recession is ahead, you will not hear me say things like “the economy is going to collapse” or “the US dollar is going to collapse,” because that is not very likely.

Let me give you an example. Here is a chart of the unemployment rate for the US since the 1950s. For the most part, it hovers around 5% unemployment. During bad recessions, it reaches 10% unemployment. That means that of the people in the US looking for work, that 10% of them are unable to find a job. In the grand scheme of things, that means that 90% of people are still working during some of the worst recessions. The difference between good times and bad is only a 5% change. That is not that great a difference. During the Great Depression, the worst unemployment was 25%. That means that 75% of people were still able to find work.

I do not want to minimize the negative impact. If you lose your job during a recession, it is painful. The Great Depression was obviously a horrible time in US history that we do not want to repeat. But it is important to keep things in perspective. When we are talking about the economy, small percentage changes can make a big difference. It is a matter of degree.

So, what does this change in perspective do for you? It keeps you from falling for ideas that the economy will completely collapse. While that is not impossible, it does not usually happen in economic activity. Imagine the economy like a large tree. Individual branches might get sick and die off, but the plant as a whole will continue to grow. This change in perspective means there is hope for the economy. That whatever problems we will face, we can survive and get through them.

Let’s compare this to what we are seeing today. Right now, a number of market bubbles are bursting in the US. The Crypto bubble is imploding, as companies like FTX have declared bankrupty and more than a million people might have lost their money. We are also seeing stress in the economy in housing prices and tech companies layoffs. Of couse, we also see economic stress coming from China. Specific areas in the economy may collapse, but the overall economy will continue on. People will still need food, clothing, medical care, lawyers, and tax accountants. These things do not go away, because Crypto is collapsing.

This perspective also provides you with very practical steps you can take to make smart money choices. If you know the overall economy is likely to keep moving forward, you can design your finances to protect yourself. The goal is to minimize your exposure to risk, while participating in growth. Here are a few things you can do:

Live below your means.
Have a 6 month Emergency Fund.
Pay down debt.
Diversify your investments.

I hope these ideas are helpful. My goal on this channel is to talk about making better financial choices. We can do things that can prevent future recessions. But also, we recognize that we are part of a strong economic system that will continue to grow. That means that despite all the chaos we see in markets today, there is hope for the economy.

Leave a comment down below letting me know what you think!

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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.