Financial media for the past several months have been full of headlines touting how strong and hot the US economy is. The supposedly tight job market was supposed to be an indicator of economic strength, and inflation was explained away as the result of a strong, growing economy. Those who even acknowledged the likelihood of recession thought it was something that wouldn’t happen before 2023 at the earliest.
Of course, anyone with an ounce of economic knowledge and who was looking at what was actually taking place in the world around us saw that was not the case. Weakness was already evident in 2019, before COVID hit. And even after the recovery, the struggles it took the economy to get back to normal indicated that not all was well.
We received confirmation of that not too long ago, as US economic growth declined 1.4% in the first quarter of the year, a significant miss from the 1% growth expected. That’s a pretty significant error, one that can’t just be chalked up to the usual reasons such as statistical error.
Mainstream media and financial markets tried to brush it off, dismissing a single quarter of decline as mere noise, nothing to worry about, and certainly not an indication that the economy is on the path to recession. But since recession is just two quarters of negative growth, and economic analysts got the call so badly wrong in the first quarter, can we trust that the economy isn’t on the path to recession?
Economic Headwinds Growing Stronger
As much as we would like to think that everything is going to be just fine, the reality is that there are significant headwinds facing the economy. And four in particular could mean that recession is coming sooner than you think.
Inflation is by far the most pressing issue facing the economy right now. And it’s one that the economic analysts also failed to see, ignored when it started, and tried to downplay as it got worse.
We first heard that inflation would never occur, then when it did occur it was called “transitory.” And now that it is nearing 9% annually, we’re still being told that it’s nothing to worry about and that the Fed will have everything under control. But will it?
The Fed is being forced to hike rates and cut its balance sheet at what could be the outset of a recession. This isn’t a position it’s used to being in, and its actions are predicated on the belief that last quarter’s economic contraction was an anomaly. If the Fed gets it wrong, it could turn the recession into something worse than it would have been.
Supply Chain Issues
Supply chain issues are another major headwind facing the economy. Markets still haven’t recovered from 2020’s lockdowns, and supply chains have experienced accordion-like waves of supply and shortages.
With China reverting to lockdowns of an unknown duration, world markets are going to be roiled yet again. The only question is how long will things last and how bad will it get.
The disruption in China is coming on top of disruptions from the war in Ukraine, which have upset markets for metals, fertilizer, and energy among others. It may very well be another 4-6 months before the full effects of the war in Ukraine are felt, and shortages begin to materialize that could be very painful for consumers.
Labor Market Concerns
Despite the so-called tight labor market, employers are having difficulty filling jobs at the same time as record numbers of people are quitting their jobs. In many cases it’s likely that employers don’t want to have to pay market rates for labor, thus leading many people to stay out of the job market.
This is certainly not a traditional recessionary labor market, nor one which is easy to figure out. And with so many people already out of the job market, the next recession could very well occur without the huge number of layoffs you might otherwise expect during a recession.
One of the major issues facing the economy, and one which many people forget about, is that of debt. The debt bubble that has been growing since 2008 is now larger than ever, and when it bursts it could unleash all sorts of damage.
Around 20% of US companies today are so-called zombies, with revenues only sufficient to service their debt. They’re stagnant, unable to grow, and with rising interest rates now unable to borrow.
In a high interest rate, recessionary environment, these companies are in a tenuous position, and they could be among the first to collapse. And once they start collapsing, they could start taking other companies down with them.
Protect Your Savings With Gold
We’ve already started to see some weakness in stock markets in the past week as investors are becoming increasingly nervous and uncertain about the future. In many ways it’s an eerie feeling, as though we’re watching 2008 happen all over again right in front of our eyes.
As many people remembered from back in 2008, stock markets lost over 50% of their value. But during the same period of time gold gained 25%, then continued to gain value as stock markets struggled to regain their footing.
That ability of gold to prosper during times when other assets falter has made it a favorite asset to own during recessions for decades, and is helping to boost its popularity today now that recession looks imminent. Whether buying gold through a gold IRA or buying gold coins or bars to store at home, there are numerous options out there to satisfy everyone’s desire for gold.
The key to protecting your savings with gold, however, is to buy gold before the crash comes. It isn’t necessarily that it’s going to be too late to buy gold if you wait until the depths of a recession, it’s just that you risk suffering major losses to stock and bond investments if you hold on to them too long.
Why let your retirement savings lose 50% or more like many people had happen to them in 2008? Why not start protecting your assets with gold today? Markets are already down 13-20% for the year. Do you want to risk the likelihood of them losing even more value before you protect your investments?
If you’re serious about protecting your wealth, maybe it’s time to start thinking about gold. Call the precious metals experts at Goldco today to learn more about how gold can help safeguard your savings.