What Everyone Ought to Know About Inflation and the Looming Recession

Now is the time for businesses and individuals to be planning for the worst – with the aid of competent professionals—even if it doesn’t occur


Every generation goes through times of economic hardship, and this past year has proven to be full of economic challenges.

The good news, according to the U.S. Bureau of Labor Statistic’s November Consumer Price Index (CPI) Report (released November 10) – shows that inflation may have peaked. Still, it remains uncomfortably high.

October prices increased 0.4% month-on-month, and non-food and non-energy prices gained 0.3%, according to the BLS. The data was low enough to cause the year-over-year inflation rate to fall to 7.7% -- down from September’s 8.2% increase.

Markets responded in a hugely bullish way to the news, with the NASDAQ Index surging more than 6% by mid-day November 10, the S&P Index jumping nearly 5%, and the Dow Industrials Index gaining 3%.

But as often said, there’s a big difference between Wall Street and Main Street and many economists still see a mild economic recession as likely. That’s why observers agree that planning one’s financial future—or insulating one’s business--and taking a proactive approach is still as vital as ever.

“This year has proven to be one of the more challenging for investors as we continue to try and navigate through global issues such as record inflation, Covid outbreaks, wars, etc.,” Matthew Senicola CRPC®, AAMS® and branch manager/managing partner at Long Island-based North Shore Wealth Management Group told Advisors Magazine.

“My team is working diligently to get our clients through this, and we have found that communication is key,” he added.

Senicola emphasizes that without communication, investors risk making a decision that might seem good now but later turns out to backfire. “We don’t know the challenges that lie ahead, and the times are uncertain, but getting through this alone isn’t the right approach,” he said.

“When the economy is uncertain, people are quick to exit out of their investment portfolios in a state of panic. However, now is the most crucial time to stay the course,” Senicola noted.

“While market volatility is normal, entering into the markets as an investor for the first time during a potentially prolonged downturn or sideways market can sour one’s experience,” said Jacob S. Jansen, AAMS®, founder and wealth manager at Jansen Wealth Management, which is headquartered in Altoona, Wisconsin.

“If a bad experience leads to avoidance, we could be witnessing a generation hesitant to invest during the most crucial and beneficial time to be investing,” he added.

The underlying message from both advisors: with a solid plan in place curated by professional wealth managers, individuals should be comfortable knowing that it is these uncertain times that bring the greatest opportunity for wealth creation and protection.

The challenges for businesses

The National Federation of Independent Business’s (NFIB) Small Business Optimism Index declined 0.8 points in October to 91.3, which marked the 10th consecutive month below the 49-year average of 98. Some 33% of owners reported that inflation was their single most important problem in running their business, three points higher than September’s reading and four points lower than July’s highest reading since the fourth quarter of 1979.

“Owners continue to show a dismal view about future sales growth and business conditions, but are still looking to hire new workers,” said NFIB Chief Economist Bill Dunkelberg in a statement issued November 8. “Inflation, supply chain disruptions, and labor shortages continue to limit the ability of many small businesses to meet the demand for their products and services,” he added.

Entrepreneurs and small business owners are a niche client group served by Weatherly Asset Management of Del Mar, California. “Many of these types of clients have entered new life stages over the last few years as they have experienced changes in employment, goals, and working patterns,” Cole Hansen, CFA and CFP®, and Senior Wealth Management Advisor at Weatherly Asset Management, explained in an interview with Advisors Magazine. “Divesting from their current business ventures takes care, planning, and direction,” he added.

Hansen noted that a solid group of professional wealth managers helping businesses can even make it possible to go from one industry to another if necessary. His message: “The proactive business owner remains diligent through delegation rather than putting the pressure on himself to get everything done on his own when times get hard.”

Persistent inflation and the threat of a recession will undoubtedly put people in tough positions economically. It could be the individual just trying to pay a bill, save and invest, or the small business owner trying to find a new venture to stay afloat financially. No matter the situation, planning with competent professionals and being proactive about financial matters can lessen the impact of such trying economic times.

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