2023 recession likely, but it’s not as bad as everyone thinks, financial expert says (2024)

FAQs

How bad will the 2023 recession be? ›

The bottom line

Signs point to a recession in 2023, not just in the U.S. but globally, though many experts remain hopeful it will not be too severe. This is good news for everyone, as it could mean fewer people lose their jobs, and household financial impacts will be mild.

The labor market is cooling down, putting less pressure on wages, while housing prices and new construction have both declined. Unfortunately, this slowdown in economic activity will likely come with a cost: According to Bloomberg's December 2022 survey of economists, there is a 70% chance of a recession in 2023.

Global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024. The forecast for 2023 is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook (WEO) but below the historical (2000–19) average of 3.8 percent.

The World Bank slashed its 2023 global economy growth outlook to 1.7% for 2023 from its earlier projection of 3%. It would mark “the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis,” the World Bank said.

“It is likely that the world economy will face recession next year as a result of the rises in interest rates in response to higher inflation,” Kay Daniel Neufeld, director and head of forecasting at the Center for Economics and Business Research, said this week.

2023 is going to be a good year in terms of financial.

As we look out to 2023, better-than-expected earnings is likely and this will be a nice driver for a bounce back in economic growth and double-digit stock gains.

Data from the past suggest that there are good reasons to believe 2023 may be a good year for the market. Inflation and the earnings contractions may seem bearish, but they might be very bullish. The key mechanism leading the market is that it's 6 to 12 months ahead of the economic data.

What will a 2023 recession look like? ›

Many economists are predicting that the United States will likely tip into a mild recession in 2023. That means economic growth and the labor market would weaken, but a downturn could be relatively brief and not too painful.

Recession is very likely in America's future, but it will take its time arriving. Although we often want bad things to be done and over with, a long time to prepare will be valuable to those with foresight.

Recessions can last from a few weeks to several years, depending on the cause and government response. Data from the National Bureau of Economic Research shows that between 1854 and 2022, the average recession lasted 17 months.

Invest in recession-proof industries.

Fear of buying the wrong stock can be mitigated by investing in established, well-known businesses. Investors may want to consider sectors that generally do well in an economic slowdown, such as consumer staples, utilities and healthcare.

The U.S. economy has a 64 percent chance of contracting in 2023, according to the average forecast among economists. Just two experts (or 15 percent) said the financial system could avoid a downturn, putting the odds of a recession at 40 percent.

Why the stock market can be safer. Although the stock market produces volatile returns, it has a long history of outpacing inflation in the long run. So, if the money you have invested in the stock market isn't going to be used in the next few years, it's likely safer to keep your money invested than to take it out.

The average forecast expects the S&P 500 to end 2023 at 4,009, according to Bloomberg, the most bearish outlook since 1999.

After ending the year down nearly 20%, the S&P 500 index is in the green for 2023. And the Nasdaq Composite — which plunged 33% in 2022 — is up more than 4.5% this year. So when will stocks fully recover from the bear market? Many experts appear optimistic it will happen in 2023.

The slowing economy is likely to bring the yearly inflation rate down to roughly 3.5%-4.0% by the end of 2023. However, this will still be higher than the Federal Reserve's target of 2.0%-2.5%.

Will a recession turn into a depression? ›

While recession and depression both describe periods of economic decline, these terms are not interchangeable. A depression is significantly worse than a recession and much rarer.

Social Security benefits and Supplemental Security Income (SSI) payments will increase by 8.7% in 2023. This is the annual cost-of-living adjustment (COLA) required by law. The increase will begin with benefits that Social Security beneficiaries receive in January 2023.

Realistically the time to accumulate enough savings will be a matter of 5-10 years, although a few will take longer. There will probably be at least one pay raise and a promotion during those years, so the assumption makes the savings math a lot easier while keeping a practical forecast.

Question: Which zodiac has money luck in 2023? Answer: Taurus, Gemini, Cancer, Leo, Libra, Sagittarius, and Pisces will be financially lucky in 2023.

International Peace & Love Day is celebrated on July 7 to spread positive energy across the world. Peace and love don't cost a thing, but their power goes far beyond anything words can capture.

Most stock market forecasts for 2023 see moderate improvement. UBS targets a year-end 2023 S&P 500 at 3900 and KKR sees it at 4150. CFRA expects a 2.9% gain, which would put the S&P over 3900. It closed the year around 3840.

Redfin deputy chief economist Taylor Marr expects about 16% fewer existing home sales in 2023 vs 2022. Marr believes potential buyers are still grappling with affordability, high mortgage rates, high home prices, inflation, and a potential recession. “People will only move if they need to,” Marr says.

Inflation will slow significantly in 2023, but achieving central bank targets will be a multiyear process. After reaching multidecade highs in 2022, global inflation will moderate in response to tightening financial conditions, softening demand, and easing supply chain conditions.

Buying a home during a recession can sometimes be a good idea — but only for people who are lucky enough to remain financially stable. Mortgage rates may drop as the Fed tries to help the economy recover, and with fewer qualified buyers and less competition, home prices can drop as well.

While no investment is guaranteed to be recession-proof, some tend to perform better than others during downturns. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and income investments.

How likely are we to go into a recession? ›

But, owing to the rapid interest rate rises by the US Federal Reserve and other big central banks, there is something like a 50% chance of a recession in 2023 and a 75% chance of it happening at some point during the next two years.

In general, prices tend to fall during a recession. This is because people are buying less, and businesses are selling less. However, some items may become more expensive during a recession. For example, food and gas prices may increase if there's an increase in demand or a decrease in supply.

During recessions, as rates go up and inflation cools, prices on goods and services fall and our personal savings rates could increase, but that all depends on the labor market and wages.

How long and how bad is the average recession? A recent Forbes analysis showed the average period of economic growth lasted 3.2 years while the average recession lasted 1.5 years – an average of 4.7 years for the full cycle.

Many economists are predicting that the United States will likely tip into a mild recession in 2023. That means economic growth and the labor market would weaken, but a downturn could be relatively brief and not too painful.

Many economists foresee a “mild” recession in 2023, caused by the Federal Reserve's anti-inflation interest rate hikes. Under one forecast, more than 3 million workers could lose their jobs. Others would see lower pay, and more would see savings diminish.

Recessions can last from a few weeks to several years, depending on the cause and government response. Data from the National Bureau of Economic Research shows that between 1854 and 2022, the average recession lasted 17 months.

Focus on budgeting and building an emergency fund

Whether the economy is surging or stalling, it's important to have enough money set aside so you can still pay your monthly bills in the event of an unexpected job loss or other emergency.

In general, prices tend to fall during a recession. This is because people are buying less, and businesses are selling less. However, some items may become more expensive during a recession. For example, food and gas prices may increase if there's an increase in demand or a decrease in supply.

During recessions, as rates go up and inflation cools, prices on goods and services fall and our personal savings rates could increase, but that all depends on the labor market and wages.

What happens if the US hits a recession? ›

What Happens in a Recession? Economic output, employment, and consumer spending drop in a recession. Interest rates are also likely to decline as the central bank (such as the U.S. Federal Reserve Bank) cuts rates to support the economy.

A typical recession persists for about a year, while an expansion often lasts more than 5 years. Recoveries from recessions are strong, reflecting the presence of a bounce-back effect.