The stock market continues to dip and wane as the last quarter of 2018 comes to a close. The Dow Jones has erased it’s gains for the entire year more than once. Many financial pundits are worrying about consumer confidence right now, which is a metric of the overall certainty and optimism that consumers feel in the economy and their personal financial situation. When buyers are confident and spending at rates that support growth across many industries, everyone from Wall Street executives to politicians celebrate because the economy is healthy.
However, when confidence slips naturally because people watch huge market falls like the events of the last quarter, suffering consumer confidence becomes a sickness and professionals find any way they can to try and restore confidence levels while promoting purchasing. Household spending accounts for about 70% of the U.S. GDP, which means that if consumers are afraid to open their wallets, the economy may be heading into a downturn. It’s certainly not heartening to see a downturn in confidence at one of the peak spending seasons across the nation.
The Consumer Confidence Racket
The problem with a system based upon consumer confidence is that it’s all an illusion. While consumer spending and job growth is a relevant metric for a healthy economy, there are a lot of factors that aren’t being measured which indicate how strong the economy really is. For example, people may be spending more at times, but whose money are they spending? If they are spending more borrowed money, then the debt cycle continues and spending is artificial. Consumer confidence is also almost always at all time highs just before a down. If recent market volatility, uncertainty with a trade war between the U.S. and China, and slowing in job growth are three early indicators of an imminent economic downturn or even a recession, then the nation has all the indicators to expect a chilly financial winter.
Consider that as recently as September, consumer confidence was the highest it’s been in years but fell sharply in November. Despite a strong economy right now, there seems to be something creeping behind the curtain that economists have been addressing for most of this year: the bear market and the possibility of a recession. With the market drops in December that were almost as steep as the October drops, consumer confidence is certain to fall even more going into the new year. What does this mean for the U.S.?
Should We Prepare For A Recession?
Even a decade later the great recession feels like a great wound that won’t heal and many people have not fully recovered from the losses they incurred in 2008. Like some ghastly spectre, it still haunts many people and there is a general sense that many in the financial industry are afraid to utter the “r” word.
However, it seems that the American people can expect a recession very soon. It’s certainly been a good year for economic growth and job creation, but those factors are likely not enough to save us and the aforementioned components like a trade war and turmoil in the presidential administration are causing Americans to sour toward the market. If you have a 401k or a qualified plan, the hit you took this quarter is probably enough to make you want to find your own financial solution.
If trusted experts are correct, the American economy is right on the cusp of a new recession and we’re overdue. Recessions historically have occurred at 4 year intervals for decades now, but it’s been nearly a decade since the market failure that brought on massive bailouts. Many CFO’s predict that we will be in a recession before the end of 2019. How prepared are you to go back to a recessed economy?
Weathering The Storm
If the storm is coming, there are going to be people tossed overboard. That’s the nature of the beast out on the stock market. However, you can beat the storm and ignore the rise and fall of the economic waves if you apply concepts that let you be your own banker. There is never a better time to align yourself with the Infinite Banking Concept by Nelson R. Nash. You won’t have to watch the markets to make sure you aren’t losing your entire retirement and you won’t even have to go to borrow from a bank to make major purchases at high interest rates when you can be in charge of your banking function in your life. Imagine having unfettered purchasing power and safety as well as true compounding growth instead of floundering during an oncoming recession.
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