<p>While economists now doubt the risk of a recession in the upcoming year, most consumers believe we are already in one — and have been for quite some time.</p><p>According to a Bankrate survey released in December 2023, six in 10 respondents believe the U.S. economy is in a recession. Among them, 31% of respondents strongly agree that the U.S. economy is in a recession, followed by 28% who somewhat agree.</p><p>Consumer pessimism in the face of economists’ growing confidence triggers a quiet recession. While not entirely like a standard recession, a quiet recession can put stress on your finances just the same. Fortunately, you can strengthen your budget and portfolio using good, old-fashioned financial wisdom.</p><p>Keep reading to learn more about this unique situation and how you can safeguard your finances.</p><h2 id="header-0">What is a Quiet Recession?</h2><p>According to the <a href="https://www.nber.org/cycles.html" rel="noopener noreferrer nofollow">National Bureau of Economic Research</a> (NBER), a conventional recession represents a wholesale decline in economic activity, including the GDP.</p><p>A quiet recession, by comparison, has no such official definition. However, it’s typically marked by a discrepancy between economic indicators and the individual financial experience.</p><p>On paper, the U.S. economy is levelling out — inflation is shrinking, the job market is growing, and the GDP has <a href="https://home.treasury.gov/news/featured-stories/the-us-economy-in-global-context" rel="noopener noreferrer nofollow">surpassed its pre-pandemic level</a>.</p><p>After a year or so of ringing alarm bells, most economists believe the U.S. can avoid a recession, achieving a soft landing in the year ahead. Just <a href="https://fortune.com/2023/12/04/business-economists-predict-us-avoid-recession-2024-inflation-keeps-cooling/" rel="noopener noreferrer nofollow">24% of economists</a> told the National Association of Business Economics that they believe a 2024 recession is likely.</p><p>But in the homes across the nation, things don’t look so optimistic. A <a href="https://globalstrategygroup.app.box.com/s/lqoleiqpsmn1fohm3prsemw1dnmanjjg" rel="noopener noreferrer nofollow">poll</a> by the Financial Times and the University of Michigan’s Ross School of Business shows a whopping 76% of Americans rate the U.S. economy negatively.</p><p>Public perception of the economy is much lower than its actual performance during today’s quiet recession — partly because the average person doesn’t trade in the typical tools used by experts to measure the economy. They don’t look at the GDP or the yield inversion curve; they work with what they know, which is their ability to make ends meet.</p><h2 id="header-1">Inflation Still Impacts the Average Person</h2><p>Officially, inflation may be higher than the central bank wants, but their efforts have moderated it considerably over the past two years. At around 3%, today’s inflation rate is nowhere near the historic levels of 2022.</p><p>This slow deflation has yet to make a positive change for the average household. Consensus <a href="https://ssti.org/blog/large-percentage-americans-report-they%E2%80%99re-struggling-make-ends-meet#:~:text&#61;Almost%2040%25%20of%20American%20adults,%25%29%20and%20Arkansas%20%2845.6%25%29." rel="noopener noreferrer nofollow">data</a> shows that 40% of U.S. adults struggle to make ends meet. The personal savings rate that was once so high during the pandemic has crash-landed, with <a href="https://www.bnnbloomberg.ca/inflation-has-depleted-pandemic-era-savings-for-many-americans-1.2007094" rel="noopener noreferrer nofollow">Bloomberg</a> reporting inflation has sapped 40% of Americans of these savings.</p><p>With fewer savings available, Americans rely on credit cards, personal loans, and lines of credit in increasing numbers. The average household debt has climbed to $17.29 trillion — with the average individual owing $59,580 across all debts. These debt levels make it <a href="https://www.marketbeat.com/articles/us-household-debt-levels-make-it-harder-but-not-impossible-for-average-american-to-invest-2023-01-20/" rel="noopener noreferrer nofollow">harder to invest</a> in mutual funds and cryptocurrencies alike.</p><h2 id="header-2">How To Strengthen Your Finances Right Now</h2><p>If a quiet recession is measured by the financial security of the individual rather than broad economic statistics, then strengthening your finances is one way to address this issue.</p><h3 id="repay-your-emergency-fund">Repay Your Emergency Fund</h3><p>Whether it’s a quiet or loud recession — or no recession at all — an emergency fund is a financial essential.</p><p>A well-stocked savings account gives you the means to handle unexpected expenses outside your usual spending. It provides a safety net when you need a car repair months before its usual tune-up or a dental procedure above and beyond your typical oral health routine.</p><p>The typical rule of thumb for these funds suggests you save between three to six months of living expenses. Where you fall on this scale depends on your risk tolerance, just like your investor profile.</p><p>These savings need to be liquid, so you can tap them in a moment’s notice. Sink them into a high-yield savings account with zero fees and withdrawal restrictions.</p><h3 id="focus-on-lowering-debt">Focus on Lowering Debt</h3><p>Agile and timely borrowing can help you in emergencies, giving you the funds to take on an urgent repair or expense when your savings are low. However, paying these funds back should remain a priority, says lending platform <a href="https://foracredit.ca/" rel="noopener noreferrer nofollow">Fora</a> — especially when it comes to a line of credit.</p><p>A line of credit comes with a minimum payment, which lets you pay less than your full outstanding balance. But whatever you don’t pay off will carry over to your next billing cycle — not only tying up your credit limit (making it unusable in the next emergency) but also possibly accruing more interest.</p><p>To limit how much these debts cost you, budget for the full balance whenever possible — or the next best thing. Put unnecessary spending on hold so you can push as much cash towards these accounts as possible.</p><h3 id="diversify-your-portfolio">Diversify Your Portfolio</h3><p>Diversification is a mainstay of investing advice, in and out of a recession — whether you’re looking for reliable bonds or more speculative cryptocurrency. A diversified portfolio stands the greatest chance of reducing your losses, as you spread your funds over a greater amount of asset classes, capitalizations, locations, and industries.</p><p>Balance speculative investing with defensive stocks that offer stability should a conventional recession rock the more volatile assets. These defensive stocks include essential utilities and commodities, like energy and utilities, as well as health care.</p><p>While crypto has potential as an economic hedge against recession due to its decentralization, many <a href="https://finance.yahoo.com/news/crypto-during-recession-expect-165050069.html" rel="noopener noreferrer nofollow">opponents</a> believe it’s too volatile to provide much protection.</p><p>Weigh both sides of this argument carefully. You need to determine your risk tolerance and investment goals before you decide how much of your portfolio to devote to crypto.</p><p>Following these risk-management check-ins can mitigate the potential for loss in extreme market conditions. You stand to gain even when all indicators suggest the market is on even ground.</p><h2 id="header-3">The Takeaway:</h2><p>The quiet recession may not grab headlines like a dramatic stock market crash, but it has a profound effect on the average consumer’s ability to spend, save, and prepare for the future.</p><p>If you’re feeling the effects of the quiet recession — or you simply want to be prepared in case market forecasts change in the future — you need to evaluate your budget. Small sacrifices can help you invest in financial basics like rebuilding savings, paying down debt, and creating a diverse portfolio. And with the job market expected to <a href="https://www.morningstar.com/markets/why-we-expect-job-market-slow-2024" rel="noopener noreferrer nofollow">grow in 2024</a>, the new year is the perfect time to find a new job that pays enough to cover these priorities and the fun stuff, too.</p>

Silent Struggles: Understanding the Quiet Recession and Securing Your Economic Well-Being

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