It seems like everywhere you turn, there it is.
Either it's people arguing a recession is coming,
or it will be narrowly avoided.
Or maybe it's happening right now.
What we are in agreement on is
But no one seems to have any idea
whether or not we're actually in one.
What we do know is a lot
of bad stuff has been happening.
We know stock prices have been cratering, inflation is
sky high, and Google searches for the word recession
have been spiking along with "elon kids".
Coincidence? Maybe.
But does any of this mean a
recession is definitely going to happen?
Or that it's already happening? Things feel bad.
The vibes are very, very bad right now, and the
economic health of America really, the whole world does
to a certain extent, depend on vibes.
Seriously though, so much of our economy's
health is about investor and consumer confidence.
It's about whether people are using
their money or saving it.
But a dash of bad vibes doesn't necessarily mean
that we're about to enter a full on recession.
They could just mean the vibes are bad.
- I declare bankruptcy.
Two consecutive quarters of GDP loss.
This is according to the
National Bureau of Economic Research.
The people who get to officially call a recession.
They're kind of like referees of financial policy.
And if that shows another quarterly loss, that's it.
Blow the whistle, flag on the play.
We're in a recession.
But see, the problem is,
It's only at that moment that the
data is conclusive enough that these economists
feel comfortable officially calling the vibes bad.
So yes, come September, we will all know whether
we are actually really, truly in a recession.
But that doesn't solve our question, which is
what's happening with our economy right now?
Some recessions are caused by one time insane events
that have never happened before and just send the
entire world into a state of turmoil.
Events like a world war, a global terror attack.
The 2001 recession was caused by a
black swan event, the dot com bubble bursting.
So was the 2008 recession when the housing
market collapsed, as well as the relatively short
2020 recession caused by COVID and subsequent lockdowns.
easy to call.
But this time, there isn't one single event that
we can look to and point the blame at.
There's a ton of factors at play here,
so we need to look at other indicators.
And there's a lot of indicators right now,
but none of these are fool-proof.
People debate all of them all the time.
And that's our question.
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Now, the stock market this year has not been pretty.
In June, the S&P 500 entered a bear market, a time
when stocks decline at least 20% from their recent peak.
you guessed it, a recession.
Sidenote: I feel like I'm going to be saying recession so many times
in this video, so sometimes I might just mix things up and
say R-word or the big R, things like that,
try some phrases out.
Yeah, bear market equals bad.
But there are a lot of people in
America who don't own stocks, and a recession
is something that affects absolutely everyone.
It hits lower income Americans as well
as members of the investor class.
So the movement of the stock market alone, they
haven't ever been considered conclusive proof of a recession.
whether they feel hopeful or scared or bullish or fatalistic.
Again, it's all vibes all the way down.
That said, not all stock prices are created equal.
The price of hot tech stocks
are massively driven by investor confidence.
But the price of commodities, things that actually exist in
the world and are needed for the world to run,
that price is directly correlated to the global supply and
demand, so it can tell us a bit more.
And there's one commodity in particular that gets
a whole lot of attention whenever the word
'Recession' starts getting thrown around - Copper.
Copper can be such a great predictor
of global economic trends that was given
a prestigious nickname, Dr. Copper.
But why is this?
A few reasons.
After iron and aluminum, copper is the
third most consumed metal in the world
and it's one of the most versatile.
It's used in everything from construction to tech, energy
and basically anything else that you can think of.
So if stuff is being made,
chances are copper is being used.
And you might ask, thinking about the recession,
Hey, Dr copper, how are you holding up?
And he or she would respond, "not great".
In fact, in just the first week of
July, it hit a 20-month low, even
while other stocks in the market are starting
to recover, indicating a renewed investor confidence.
Copper, it just keeps going down, and a lot
of people would argue that this is proof that
our problems are worse than they seem.
Now, the other word that you've probably
been hearing a lot lately, maybe even
more than recession, is inflation.
Every recession since World War II
has seen an inflation hike first.
The consumer price Index, which is one way to
measure inflation, is at its highest level in 40 years.
No matter who you are, what you do, where you live,
what sort of lifestyle you have, inflation will hit you.
I'll tell you about my worst hit.
I own a moving and storage business.
My warehouse rent went up 55% in one year.
And when everyone starts getting negatively affected
in one way or another, that causes a change in
There's something that's called the
a highly respected survey of consumer confidence.
And this last June, they found consumer sentiment
to be at the lowest recorded level since
they started doing the survey 70 years ago.
This is the perfect storm.
It's bad data and even worse vibes.
So based on all this, it seems like
a recession is absolutely, definitely 100% happening, right?
Well, there's also some hopeful data coming out, data that
some people have been using to back their claim that
we have not entered a full recession and we won't,
that we came close, but the worst is actually over.
We managed to get control of the car and
steer away right before crashing into a tree.
For instance, real time data shows that shipping rates are
likely going to decrease over the next six months.
Used car prices, a good indicator
of inflation, have now flatlined.
Commodity prices are still going down, which
is not good for the market.
But when the price of commodities
goes down, so does inflation.
And folks, that's not vibes, that's facts.
[Music]
So in this case,
thanks to the fear of a recession
It's like not wanting to go out because you think you'll
get sick, so you stay in and you don't get sick.
And it's like, yeah, I guess that logic works.
Meanwhile, the Federal Reserve is doing what they
can to make this hope a reality using
interest rates, the most powerful tool they have.
The only problem is, if they use this tool wrong,
even by just a fraction, they might very well cause
the recession that they're working so hard to avoid.
When the Fed raises interest rates, as they have
done in the last few months, what they're trying
to do is achieve something called a soft landing.
This is where the raised interest rates
curb inflation just enough and they saved
the economy from a far worse outcome.
- Just wanna tell you both good luck. We're all counting on you.
- A totally successful soft landing,
however, is very rare.
It's so rare, it's actually only been
achieved in American history once in 1994.
You want to raise the interest rates just enough
to counterbalance inflation, but not so much that the
interest rates themselves cause the economy to contract.
It's like a chef preparing some really
demanding, delicate piece of meat, like a
squab or some other bird like that.
If you undercook it, it's rubbery.
If you overcook it, your dad and
everyone you know loses their job.
But actually, it's worse.
Every move the Fed makes is being highly
scrutinized and immediately priced into the extremely unstable
stock in crypto and commodity markets.
An increase in interest rates, if done too
aggressively, can cause an inverted yield curve.
That's what happens when shorter duration bonds surpass long term
bonds, a sign that bond investors think that the economy
is not going to get better anytime soon.
that's right, the R-word.
So really it's like the chef is cooking the
squab, but she's doing it with one eye closed
and one arm tied behind her back.
Squab talk aside, we need to remember that
And there are so many factors that
impact America that America can't really control.
Most headline inflation items, like energy and commodity
prices are set at a global level.
And so it might not matter what the Fed does.
Maybe it's all outside their control.
So I guess it's kind of like a chef
preparing a delicate piece of meat with one eye
closed and one hand tied behind her back.
And she's also working in a kitchen that's on fire,
in a building that's collapsing in a city that's experiencing
a level seven earthquake all at the same time.
Can she still prepare the squab, right? Maybe.
But it won't be easy.
Okay, so let's assume a recession is
coming, or let's assume it's already happening.
A market dip, as we know, is
often a great time to invest.
A lot of people getting spooked right
now are panic selling, and this could
breed opportunities, but it's still risky.
We don't know when the market will hit bottom.
So if you want to try and buy low, here
are a few general things to keep in mind.
Instead, you should look for industries
that are considered recession proof.
Companies that actually make things,
that actually do things.
Think about utilities, healthcare, consumer staples,
stuff people need, made by companies with
healthy profits that will survive a recession.
Another tip that some investors use when buying in
a downturn, although it can be a bit controversial,
is utilizing something called
You diversify your portfolio with asset classes
that tend to move in opposite directions.
Things like oil prices and airline stock,
real estate companies and investment banks,
video games and condom brands.
You get the picture.
But keep in mind,
This is the time to first put aside some
emergency cash reserves, if you don't already have them.
And also,
if you have any high interest debt,
this is where you're really going to feel it.
If you currently have a balance on a card,
do whatever you can to pay it off.
Beg, borrow, steal, whatever you need to do
to get rid of those crazy interest rates.
And if you can't pay it off all at
once, maybe you want to consider transferring your debt
to a low interest rate card or consolidating.
If you're a long time customer with a history of
paying on time, call your credit card company and see
if you can negotiate a lower interest rate.
They might do it.
Just do anything you can.
Don't sit back and watch this crazy interest pile up.
But also,
Not right now.
Credit scores are going to become more and more important
in the next year, and the age of your accounts
is a factor when trying to get credit.
So maybe transfer the balance over to
a different card, if that makes sense.
But keep the original card active.
And lastly,
Recessions happen.
They come and they go.
Since 1990, the average recession
lasted just 15 months.
There's some economists who argue that recessions are necessary
a way for the economy to burn off excess
fat and get lean and mean again.
There are other economists who absolutely disagree with this,
but they all agree that it won't last forever.
That is, if this recession is even
going to happen, which, as we've learned,
is surprisingly difficult to determine.
So either way, plan ahead.
Pay off bad debt, save money, invest safely,
and do it now before the refs call the play,
OUCH
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