Two recessions in two years. Is it possible? Well, calls for a U.S. recession have been on the rise recently following the Fed's decision to raise rates at its March FOMC meeting. To be sure, given several factors already in play, it's possible that we could see an economic slowdown later this year or even early next year.
While some market watchers have suggested that policymakers could simply stop raising rates if a downturn emerges, the reality is that the Fed's credibility and its playbook are considerably changed from where it was two years ago.
Make no mistake, at this moment, the U.S. economy is doing well. And recent data suggest that growth has been on a solid footing since the COVID-related lockdowns eased last year. Nevertheless, various developments related to monetary policy uncertainty and rising geopolitical tensions suggest that the road to U.S. economic growth likely will face some headwinds in the year ahead.
Indeed, the bond market, typically a canary in the coal mine when it comes to the health of the economy, is now indicative of heightened financial and economic stress as escalating war tensions and rising interest rates have led to yield curve flattening. And too much flattening could be an early indicator of an impending recession.
This outlook has led some investors to ask whether there is anything they should be doing now to avoid downside risks related to a market or economic downturn. The truth is that many investors have been caught flat-footed by trying to time the markets during similar periods of uncertainty.
And that's why during times like these, it’s essential for driven individuals on their path to financial independence mastery to focus on an approach that has worked time and time again: consistently executing on a well-defined financial plan.
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