There has been a lot of news lately about the possibility of a recession. The economic data has been evolving over the past few months, so I wanted to help break it down.

I’ll start by sharing some of the good news, followed by some of the bad news, and then my take.

The Good News

  • Inflation may be declining: Recent data shows inflation growing at 8.5% per year. It was previously growing at 9.1% per year.
  • Gas prices are down about $1 per gallon, or 20%, from their high in June.
  • The unemployment rate is at a 50-year low of 3.5%.
  • We’ve recovered all the jobs lost during the pandemic.
  • Home prices hit a record high for the 40th month in a row. They are up 20% over the last year and 40% over the past two years (through May, the most recent data available).
  • Company Earnings are strong: Over half the S&P 500 has now reported second-quarter earnings. Three in four have beaten earnings estimates.
  • Savings accounts are finally paying meaningful interest. You can earn over 1.50% at a number of banks. Plus, Inflation Bonds are still paying 9.62%. 

The Bad News

  • America’s inflation-adjusted Gross Domestic Product has declined for two straight quarters.
  • Only 10% of people feel positive about the economy.
  • Inflation is still near a four-decade high.
  • Housing activity may be declining. Prices in San Francisco are down 8% from a year ago. Mortgage applications to purchase a home dropped 19% compared to a year ago.
  • The war in Ukraine is ongoing, and tensions with China are rising.
  • Despite a good start to this quarter, stocks and bonds remain negative year-to-date. Unprofitable technology companies, in particular, are down 61%.

My Take

There is a saying that stocks “climb a wall of worry.”  When it comes to investing, there is always something to worry about. Yet in the face of these persistent and ever-present risks, stocks (and bonds) have provided positive long-term returns. If there was no risk, there would be no return.

I think The New York Times summarized our current situation well: “If the United States is headed into a recession, it is taking an unusual route, with many markers of a boom.” While a recession could occur later this year, or next year, or even the following year, for now the positive news outweighs the negative.

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The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Think Different Financial Planning cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Think Different Financial Planning does not provide tax or legal advice, and nothing contained in these materials should be taken as such. As always please remember investing involves risk and possible loss of principal capital. Advisory services are only offered to clients or prospective clients where Think Different Financial Planning and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Think Different Financial Planning unless a client service agreement is in place.