Latest news with #stagflation
CNET
5 days ago
- Business
- CNET
Worried About a Recession? Take These 5 Steps to Prepare Now
Recession risks are down, but keep your guard up. Getty Images/Jeffrey Hazelwood/CNET Early this spring, talk of a recession swirled after President Donald Trump began his chaotic tariff campaign. The likelihood of a severe economic downturn hit 66%, according to Polymarket. As Trump deferred some of his most aggressive trade proposals, those forecasts leveled out, but the contours of a potential recession are hard to ignore. Growth in the first quarter of 2025? Down. Jobless claims? Sharply higher. Consumer sentiment? That almost hit rock bottom. On top of that, there are whispers of stagflation, a painful mix of high prices and joblessness, which is even worse than a recession. You won't see the same cracks reflected in the stock market, which runs on the moves of a few big names on Wall Street. Investors cheer each time tariffs are delayed or a trade deal is hinted at. It's why markets continue to etch new highs when most of us feel like we're walking a tightrope. Businesses are effectively in a holding pattern, cutting costs and delaying hiring, which adds to the economic unease. Households battling elevated prices and facing job insecurity are tightening their budgets and spending less. Financial uncertainty can become a self-fulfilling prophecy, said Shang Saavedra, founder and CEO of Save My Cents, a personal finance education platform. Read more: Worse Than a Recession? Trump's Tariffs Risk 'Self-Inflicted' Stagflation Are all recessions the same? As tough as they are, recessions are a built-in feature of our economy. Modern capitalism has a historic boom and bust cycle. Since the mid-20th century, the US has experienced a recession roughly once every five to seven years, with an average length of 11 months. The most recent one hit with the COVID-19 pandemic in March 2020. By April, more than 16 million jobs were lost. Federal policymakers implemented relief and recovery measures to ease hardship and help spur an economic recovery. The pandemic recession was the deepest but also the shortest in the post-World War II era. Now, after a significant period of growth, many experts believe another economic reset is on the horizon. 'It's never a matter of 'if,' but 'when' the next recession is,' said Saavedra. FAQ: How to prepare for a recession Looking back at past recessions can help us understand what we're facing and allow us to take proactive action regarding money decisions. That means checking in with our financial plans and figuring out what changes we need to make to stay on track. 1. Is it possible to plan for a recession? Even if the economy is a mess, most of us have time to assess our financial situation and make a plan before an economic downturn becomes a reality. "Some folks wait on a recession to be officially 'called' before changing their financial behavior,' said Berna Anat, financial educator and author of Money Out Loud: All the Financial Stuff No One Taught Us. Anat recommends trying to reroute to a preparedness mindset instead of a panic mind-set. For example, focus on establishing realistic safeguards and strengthening your financial foundation. Consider the specific steps you would take if you get laid off. Contributing to an emergency fund and managing your debt levels now can create a buffer against the potential financial shocks of a recession. Impulsive actions, like selling investments at a loss, can set you back in the long run. 'Fear narrows our focus and limits our cognitive ability, so it's really important to prepare now,' said Lisa Countryman-Quiroz, CEO of JVS Bay Area, a workforce development nonprofit. 2. How much cash should I have saved? In the event of job loss or a reduction in work hours, you need to be able to cover your monthly bills without borrowing money or dipping into your retirement account. "You don't want to find yourself relying on credit as your only tool for emergencies,' Anat said. Experts recommend having an emergency fund that would allow you to cover three to six months of living expenses. To settle on an amount that makes you feel financially secure, consider your current income and job stability; your monthly expenses (housing, medical bills, groceries, utilities); and your future plans (expanding your family, moving, caring for a loved one). To prepare, adjust your budget and avoid stretching your finances too much with unnecessary expenses. Delay major purchases like vacations or buying a home, and avoid growing a balance on a credit card or taking out new loans that will accumulate interest. Pro tip: The best place to keep your emergency fund is in an account you can access that keeps your money secure. Saavedra recommends a high-yield savings account because it's liquid and provides solid returns on your balance. Money market accounts and certificates of deposit (CDs) can also be options. 3. What should I do if I'm worried about layoffs? When mass layoffs occur during recessions, it can take months to find new employment. Last year, before talk of a recession even took over headlines, it took jobseekers an average of eight months and 294 applications to land a job. Part of building your financial safety net includes planning for job loss before it happens, said Countryman-Quiroz. But having a resume ready is only the first step. Actively networking to expand your professional connections can also open doors to new opportunities. More importantly, try carving out 30 minutes each week to focus on building new skills to help you stand out to employers. Doing this prep work while employed can help you transition more easily into new roles or industries. "It doesn't matter where you are in your career or in the workforce, it's absolutely critical that you build skills around technology -- especially AI -- critical thinking, collaboration and communication," said Countryman-Quiroz. Read more: Don't Make the Job Hunt Harder. 9 Strategies to Stay Sane and Get Hired 4. Should I move my investments? While market downturns are unsettling, you don't always need to overhaul your investment strategy. The stock market has a history of recovering from dips and growing over time. Selling when things are down often means missing out on the recovery. For most people, staying the course is better than making drastic changes: Stick with a mix of investments you're comfortable with and continue investing. "If retirement is at least five years away, it is not the time to panic," said Saavedra. That said, if you are nearing retirement, it may be worth considering safer investments. Money market funds or CDs could be good options if you need more balance and less risk. 5. Is it better to save money or pay off debt? Having debt becomes a lot more burdensome during a recession, especially if you have a high-interest credit card balance eating away at your income. If inflation stays high or increases, those APRs will only get more painful. You don't need to be 100% debt-free to weather a recession. The goal is to lessen your financial vulnerability, not deplete your savings. Before tackling debt, Saavedra recommends having at least one month of living expenses saved in your emergency fund. Then, start by paying down the debt with the highest interest rates (10% and above) so you pay the least interest over time. If you're juggling several high-interest debts (medical bills, credit cards, etc.), you might also consider a debt consolidation loan, which combines those debts into a single personal loan with one fixed monthly payment. Another strategy is to move your credit card debt to a balance transfer card with a 0% introductory APR, which gives you some breathing room to avoid interest charges for 12 to 24 months. Once that introductory period ends, the card's regular APR kicks in, so you need a plan to pay off what's left. How to emotionally prepare for a recession Preparing for a recession involves more than just money. It's about creating a safety net and having a crucial lifeline for your emotional well-being during a stressful time. 'You want to feel emotionally supported, knowing that you won't have only yourself to rely on when the seasons change,' said Anat. For example, reach out to close friends and family to discuss ways you can support each other. Consider setting up informal agreements or exchanging help for meals, caregiving, carpooling or household maintenance. Anat also recommends connecting with local mutual aid funds in your community and exploring ways to contribute resources or receive support. You could start researching mental health services in your area, particularly those offering sliding scale fees or affordable care. In the end, recessions aren't new. If you think of yourself as the captain of a ship or boat, a recession is like a big wave or storm that comes and goes, according to Anat. The size and scope are often unpredictable, but all you can do is prepare for the worst.
Yahoo
6 days ago
- Business
- Yahoo
Get ready for a US stock market crash?
2025 has been a year of record highs for the UK and US stock markets. But while British shares continue to look undervalued, the same can't be said for American equities. In fact, despite numerous economic threats and uncertainties looming on the horizon, the S&P 500 has continued to climb higher. The market's resilience is certainly welcome, but it could also be an early warning sign of complacency. And as a result, numerous investing experts have started warning of the possibility of catastrophe later this year. Caution advised Perhaps one of the most vocal voices of caution is coming from the CEO of JP Morgan Chase, Jamie Dimon. With new US tariffs soon to be reinstated with huge trading partners like Europe and China (unless a trade deal suddenly emerges), he's warned of incoming inflation. Depending on its severity, consumer spending could soften significantly, resulting in slower economic growth. And in the worst-case scenario, that could lead to stagflation. Dimon isn't the only one getting nervous. Other high-profile investors such as Michael Burry and Albert Edwards are also becoming sceptical that the US stock market can sustain its current valuations, with a correction, or potentially even a full-blown crash, due to arrive later this year. Valid concerns These experts have raised some legitimate concerns over the current state of the economy. And the US stock market does look vulnerable in certain sectors, particularly in artificial intelligence (AI), where sky-high valuations are completely divorced from fundamentals. For example, Palantir Technologies (NASDAQ:PLTR) is one US stock that I'm steering clear of. The business actually looks quite promising. As a specialist in data analytics and AI that even the US government uses in counter-terrorism, Palantir has proven to be a force to be reckoned with. That's translated into phenomenal revenue growth rates averaging 27% a year since 2020. And if management's forecast is correct, the company's on track to deliver up to $1.8bn in free cash flow by the end of 2025. Needless to say, those are some impressive feats. And when combined with the hype surrounding the AI industry, the US stock's up a jaw-dropping 395% in the last 12 months alone! However, this excitement has pushed the price-to-sales ratio all the way to 113. For reference, the average for US stocks is 3.2. In other words, all it takes is one missed earnings target for volatility to wreak havoc on the Palantir share price. And considering the business is highly dependent on US government contracts, the slightest cut in the defence budget could be all it takes to push things over the edge. Management's fully aware of this risk and has been actively diversifying into commercial markets to reduce its dependency. But whether this process can be completed fast enough is anyone's best guess at this stage. Keep calm, carry on Is the stock market guaranteed to crash in 2025? No. While investors like Dimon are right to highlight market vulnerabilities, timing market crashes remains exceptionally difficult. And it wouldn't be the first time experts have called for disaster, only for stocks to keep rising. The key takeaway isn't to ignore these warnings but to use them as a starting point for further research to identify potential weaknesses in a portfolio and make sure investors are staying within their risk tolerances. The post Get ready for a US stock market crash? appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Daily Mail
17-07-2025
- Business
- Daily Mail
Stagflation fears fuel interest rate conundrum at the Bank of England amid jobs bloodbath
The Bank of England has an interest rate headache as the spectre of stagflation hangs over Britain. Bleak figures from the Office for National Statistics yesterday showed unemployment at a four-year high of 4.7 per cent as Labour's tax hikes cost jobs. Borrowers will hope that the jobs bloodbath, combined with two months in a row of declining economic output, convinces the Bank to cut rates next month. But the central bank is also grappling with surging inflation at a 17-month high of 3.6 per cent. While a rate cut next month is expected, analysts warned it is far from certain. Charlie McCurdy, an economist at the Resolution Foundation, said: 'The jobs data presents a clear case for lowering rates. But higher-than-expected inflation muddies the picture. The decision next month is far from straightforward.' Central banks typically raise interest rates to control inflation and cut them when it is no longer a problem and the economy needs a lift. The Bank has cut rates four times since last August – from 5.25 per cent to 4.25 per cent – and investors now think there will be fewer cuts for the rest of this year. Simon French, economist at Panmure Liberum, expects two, having pencilled in four. Matthew Ryan, at global financial services firm Ebury, said: 'Things are going from bad to worse. 'This week's data puts the Bank in an extremely tough spot… an August rate reduction remains on the cards.'
Bloomberg
17-07-2025
- Business
- Bloomberg
US Seeing Lift Off in Inflation in Goods: Economist Slok
Torsten Slok, chief economist at Apollo, discusses potential stagflation shocks to the US economy and the risk of more persistent inflation from tariffs. (Source: Bloomberg)
Daily Mail
16-07-2025
- Business
- Daily Mail
UK on the brink of stagflation after growth-killing Labour tax hikes
Britain is at risk of a bout of stagflation as Labour's tax hikes have pushed up inflation and killed off growth. Bleak official figures today showed consumer price inflation climbed to a higher-than-expected 3.6 per cent in June. It comes as the economy also suffers from disappointing growth, with data last week showing that output shrank in May for the second month in a row. The figures fuelled fears that the UK is facing a period of stagflation – the dismal scenario in which growth stagnates as prices still climb. Experts warned inflation will remain above 3 per cent for the rest of this year, meaning fewer interest rate cuts. The National Institute of Economic and Social Research said it does not expect inflation to return to the 2 per cent target until late next year. Monica George Michail, an economist at the institute, said: 'We forecast inflation to remain elevated and only fall back to the 2 per cent target on a lasting basis by late 2026. 'We therefore expect the Bank of England to cut interest rates just one further time this year.' In June, inflation hit its highest level since January 2024, despite expectations that it would remain flat at 3.4 per cent. The pace of price rises has more than doubled since last September, when it was just 1.7 per cent. And food inflation has climbed higher for the third month in a row to hit a 16-month high of 4.5 per cent. Staples such as bread, rice and pasta were among the foods that saw a sharp price increase during the month. Meanwhile, a steep 7.9 per cent increase in air fares between May and June – a time of year when they usually go up – was the largest June rise for seven years. The figures came as an embarrassing blow for Chancellor Rachel Reeves less than 24 hours after her Mansion House speech in the City in which she announced a series of reforms designed to boost growth and claimed to be creating 'a Britain that is better off'. But experts said her £25billion employer National Insurance raid is helping push up inflation as higher costs are passed on to consumers. Some warned that the menace of 'stagflation' was approaching. Higher inflation will make it harder for the Bank of England to cut interest rates. However, the Bank's worries about unemployment mean it is still likely to cut borrowing costs next month. Meanwhile, job figures due out today threaten to add to the gloom facing the Chancellor. Anna Leach, chief economist at the Institute of Directors, said: 'With inflation still proving sticky and economic growth stagnating, the UK is skirting the edges of stagflation.' Tory business spokesman Andrew Griffith said the figures 'show the folly of the Chancellor's choice to hike National Insurance on businesses rather than the more honest approach of income tax'. He added: 'Higher costs and rising unemployment are the price.' Andrew Wishart, an analyst at Berenberg, also blamed the Chancellor for the state of the economy. 'Companies passing on Government-imposed increases in their costs caused inflation to come in higher than expected in June,' he said. Ms Reeves said: 'I know working people are still struggling with the cost of living. 'There is more to do and I'm determined we deliver on our Plan for Change to put more money into people's pockets.'
