More than half of Americans think it is at least somewhat likely that a recession hits the economy in 2024.
About 59% of the 1,039 adults in a GOBankingRates survey in November responded that way when they were asked how likely it is that a recession will occur in the upcoming year.
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About 29% of respondents answered “somewhat likely,” and a little over 30% believe it’s “very likely” that the economy will experience a downturn. About 31% put the odds at 50-50. On the flip side, only 8% believe the country might dodge the recessionary bullet.
Some experts think a recession is coming in fall 2024. Let’s see what others say.
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An Economist’s Prediction
So, who could be right? The majority of our survey participants or the optimistic few?
Here’s the prediction of Gus Faucher, chief economist at PNC Financial Services Group: “Consumer spending growth will soften into 2024 as job and wage growth ease, high interest rates remain a drag and households increase their saving. The open question remains whether consumer fundamentals are solid enough to support continued modest growth in consumer spending throughout next year or if consumer spending outright declines and the U.S. economy falls into recession.”
Recognizing the complexities of predicting the future, Faucher said, “Our baseline outlook at PNC is for a mild recession to start in mid-2024 as high interest rates continue to weigh on the economy.”
Other Experts Weigh In on Potential 2024 Recession
Oliver Rust, head of product at independent inflation data aggregator Truflation, agrees that the economic trajectory in 2024 hinges on various factors.
“Whether the U.S. manages to avoid a recession in 2024 will depend on the full effect of higher interest rates on consumers and businesses,” he said. “We are still seeing mixed signals across the wider economy, so it’s difficult to predict how the economy will perform as we head into the New Year.
“The big assumption here for a bull market case is that higher interest rates won’t have a significant impact on consumer spending, although we have seen spending on non-essential items slowing. For now, though, retail sales remain solid as consumers purchase more affordable options.”
However, he cautioned that sustained reliance on increased borrowing to finance spending habits could usher in a bear-market scenario if interest rates persist at elevated levels.
Gary Quinzel, CFP, CFA, and VP of portfolio consulting at Wealth Enhancement Group, provided a prediction similar to Faucher’s.
“While the narrative for a soft landing has grown considerably over the past few months,” he said, “we still believe that a mild recession is possible in 2024. U.S. consumers are running out of excess savings, student loan payments have restarted for millions, and credit card delinquency rates are rising significantly.”
Overall, the consensus among these experts appears to echo the sentiments of the majority of our survey participants, who are bracing themselves for a recession in 2024.
How To Financially Prepare for a Recession
While experts can’t predict with 100% certainty whether a recession will happen in 2024, it’s never a bad idea to financially prepare yourself for the future. Here are four smart steps to take to strengthen your financial fortress.
Re-Evaluate Your Investments
If a substantial amount of your net worth is tied up in investments, consider diversifying your portfolio to spread risk and rebalancing it to adapt to changing economic conditions.
“Owning cyclical industry stocks ahead of a recession can be especially problematic,” Quinzel said. “For example, automobiles and consumer durables could both see weakness, assuming that rates stay higher for longer as consumers are already stretched, and the cost of financing is unlikely to come down anytime soon.”
Another sector that Quinzel believes may suffer in a recession is energy.
“We’ve already seen the price of oil fall from $94 in late September to $74 today,” he said. “And if we experience further economic weakness, I believe that the risk for oil remains on the downside.”
However, remember that trying to outguess the market is not a wise investment strategy. Instead of attempting to time the market, focus on creating a well-diversified portfolio and basing your investment decisions on your risk tolerance and financial goals. Talk to a financial advisor to help you craft an investment plan sturdy enough to weather a recession.
Build an Emergency Fund
One of the first lines of defense in uncertain times is a cushy emergency fund. Aim to squirrel away at least three to six months’ worth of living expenses so you have enough to tide you over if you lose your job or face unforeseen circumstances during a recession.
Let’s say your monthly expenses total $1,500. Your ideal emergency fund would be $4,500 to $9,000. Make sure to store your emergency fund separately from your checking account so you won’t be tempted to spend it on unnecessary items. Some safe places to keep your emergency fund include high-yield savings accounts, money-market accounts or no-penalty CDs.
Diversify Your Income Streams
According to the Bureau of Labor Statistics, monthly job losses averaged 712,000 from October 2008 through March 2009. This sobering period during the Great Recession is a stark reminder that relying on a single income source can leave you vulnerable during economic downturns. Here are some ideas to help you generate extra cash flow in 2024:
Take on freelance work
Rent out spare rooms for extra cash
Sell used items on eBay, Craigslist or Facebook Marketplace
Drive for Uber or Lyft
Ask for a raise at your job
Host a garage sale
Offer tutoring services
Babysit or pet sit
Pay Down High-Interest Debt
High-interest debt can weigh you down during tough economic times. If you have not already, start prioritizing paying down your credit card balances and other high-interest loans. Consider the debt avalanche or debt snowball methods to tackle your debts faster. Debt consolidation loans and balance transfer cards can also be excellent ways to lower your interest payments and speed up your debt payoff timeline.
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This article originally appeared on GOBankingRates.com: Many Believe We’re Headed Toward a Recession Next Year — Here’s What an Economist Thinks
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