Bear Markets and Recessions Happen: How to Be Ready

The U.S. stock market - using the S&P 500 index as a gauge - is a stone’s throw from an official bear market. Bear markets are typically thought of as a 20% decline from all-time highs. As of this writing, the S&P 500 is down 19%.

Likewise, the “recession” word is being tossed around more and more frequently. Very generally, the media considers a recession to be at least two consecutive quarters of negative economic growth using gross domestic product (GDP) as a measure. Case and point regarding recession talk, a recent Bloomberg survey of economists estimated the likelihood of recession in the next 12 months at 30%, akin to the batting average of a strong major league hitter (or the odds of a Spirit Airlines flight arriving on time). More concerning is the trajectory, as this percentage was as low as 10% just eight months ago.

My goal in sharing this information in not to be an alarmist. In fact, those who know me well would tell you that I rarely say something negative without immediately adding a positive. I’m simply a glass-half-full kind of person. But I’m also the type that likes to be prepared (a CERTIFIED FINANCIAL PLANNER™ that plans…no surprise there!). I want you to be prepared, too.

Let’s be clear: consistently predicting the onset, severity, or duration of a bear market or recession is a fool’s errand; no one knows any of these things with certainty. Nonetheless, between high inflation, Federal Reserve rate hikes, seemingly relentless supply chain issues, and a volatile stock market, there are many reasons to ensure your financial house is in order now and ready to withstand a possible economic pullback.

Enter the oh-so-humble checklist below on “What Issues Should I Consider During a Recession or Market Correction?” The point of sharing this checklist is not that it can address every unique situation (personal finance is highly personal, after all). Rather, the checklist is here to make you think. Think about areas of your financial life where you are strong - and also those in which you may be vulnerable.

A strengths, weaknesses, opportunities, and threats (SWOT) analysis adds the most value before the crisis, whatever and whenever that may be. Making sure your finances are buttoned up today can save serious stress – and even help you to take advantage of emerging opportunities – when the next inevitable recession does occur. I hope the checklist below helps you on that journey.

Disclaimer: This is a blog post and is not intended as investment, tax, or legal advice. Please do not misconstrue it as any of those things. The content is intended for informational purposes only and should not be relied upon for making investment or financial decisions. Everyone’s situation is different; obtaining guidance from licensed, experienced professionals prior to taking (or deferring) any action is advised.