Will We See a Recession in 2023?

Will We See a Recession in 2023?

There’s no easy way to say this: The United States economy is facing several headwinds that could trigger a severe new downturn in the near future. While no one can predict with certainty when and how severe a recession will be, investors can (and should) be preparing.

This is a wise time for adopting proactive financial planning strategies to mitigate risks, limit your income tax liability, and preserve generational wealth. That’s why this article focuses on why a recession is likely this year, providing tips for potentially reducing your exposure to the economic conditions that may result.

This article discusses the following:

  • Unfortunately, yes: It looks extremely likely this year
  • Strategic planning can help get fortify your wealth
  • Why a long-term approach is generally preferable
  • Retirement planning for high-net-worth individuals 

Unfortunately, Yes: It Looks Extremely Likely This Year

Financial planning isn’t all fun and games. Last year, newscasters, pundits, and politicians laughed at questions about a possible recession. Now, in 2023, indicators suggest that we are headed into a recession. Exactly when we’ll see the worst of it and how long the storm could last is anyone’s guess. 

The underlying truth, regardless, is that harder times lie ahead for the U.S. economy. We are eager to help you get ready. Americans have already experienced a sharp rise in inflation in 2022, driven by too much money in circulation, supply chain disruptions, labor shortages, and pent-up demand. This, paired with a bear market on Wall Street, made for a tough year. 

I’d love to say that we’d begun bouncing back, but the fact that the Federal Reserve is still planning more interest rate hikes suggests otherwise. In fact, raising interest rates sooner than expected to contain inflation might trigger a recession sooner. While a larger downturn seems inevitable for 2023, you can take steps to protect your savings, reduce possible risks, and get your portfolio market-weather-ready.

Strategic Planning Can Help Get Fortify Your Wealth

Most of our clients are interested in leaving a nest egg to last beyond them. However, strategic planning is essential to creating a generational legacy in uncertain times. You have to lay out clear goals and expectations for the long term and take proactive steps toward them as soon as possible. 

If you have any debt, you need to start with getting that consolidated. Next, consider cutting costs where appropriate, investing wisely (as well as consistently), and implementing an emergency fund. While recessions are unavoidable, proper planning may help to reduce the severity of their impact.

As an investor, one of the most effective ways to reduce your exposure to market volatility is by diversifying your portfolio. This approach deliberately varies your investments across different asset classes, sectors, and geographies. Your equity gets spread between stocks, bonds, real estate, commodities, and alternative assets.

This prevents you from being over-invested in any one asset, should losses occur. For example, if a tech stock loses value, the impact is limited overall because your other investments are unrelated. Your equity in commercial real estate (the value of which tends to ignore inflation) and other assets remain unaffected. 

Similarly, during uncertain times, many investors gravitate toward stocks that offer stable earnings, strong cash flows, and reasonable valuations. Companies with durable competitive advantages, high barriers to entry, and reliable dividends may provide a defensive position in a recessionary environment, as well. 

There’s a Science Behind Creating Generational Wealth. We Describe Its Benefits and More, Here.

Why a Long-Term Approach Is Generally Preferable

In today’s unpredictable economic climate, even the affluent can be tempted to worry about how a potential recession might impact their financial security. The possibility of losing a job, struggling to pay bills, and seeing investments lose value can be stressful and overwhelming. 

However, adopting a long-term approach to protecting your wealth from a recession can benefit you by helping to establish a sense of security. This approach allows, for instance, a broader perspective on market trends and economic cycles. While recessions can be disruptive, they are a normal part of the economic cycle. 

A long-term approach can also keep your financial objectives in clearer focus. Playing the long game requires patience and discipline. In other words, it means avoiding the temptation to react to short-term market fluctuations. When news headlines spook other investors into panic selling a certain stock (that may still have great potential), you take a deep breath and ride it out.

Generally speaking, you are likely to be extremely glad that you did. When, for example, the company in question resolves its temporary supply chain issues—and its stock abruptly starts making up for its losses—you can relax. Those who sold off all their shares can’t get back in, at that point, without losing money to do so. 

While they kick themselves for throwing away the likely gains to come, you could celebrate the fact that you haven’t. By staying true to your goals, you can avoid letting these kinds of impulsive decisions reduce the growth of your investments. 

Decisions like these are what we like to refer to as “Million-Dollar Choices,” but if you’re not sure you could maintain the same level of discipline alone, you don’t have to: Relying on the objectivity of a CERTIFIED FINANCIAL PLANNER™ in Utah can make it much easier.

Retirement Planning for High-Net-Worth Individuals

Strategically managing your assets, investments, and lifestyle habits can be key to staying ahead of an economic recession. Setting realistic, achievable financial goals helps to ensure that a well-crafted portfolio is created, potentially insulating your wealth from long-lasting financial losses amid the downturn.

Professional retirement planning can also help you reduce your tax bill and possibly limit the number of legal risks associated with various asset classes. Both of these are important aspects for protecting or increasing your net worth during the economic turbulence of a recession. 
They are only two among several ways in which professional retirement planning can help facilitate creating a generational legacy, despite the economic weather. Scott Marsh Financial specializes in financial planning and wealth management in Utah. Contact us to learn more.

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More about the author: Scott Marsh

Scott Marsh has been referred to as America’s Financial Advisor and Educator. He is considered one of the foremost thought leaders in the financial services industry and hopes to share his knowledge with others so they can create a legacy of financial prosperity. He is the founder of Scott Marsh...