What you can do now to prepare for a possible recession
MINNEAPOLIS -- Markets don't react well to volatility, which doesn't bode well when many Americans are increasingly anxious about an economic downturn.
"The thing that is tough is that we're human beings with emotions," said Jill Schlesinger, CBS News Business Analyst. "When markets are volatile it's not a great time to be reactive."
A new survey released Monday showed nearly 70% of economists who responded think the United States is headed toward a recession, which officially means a prolonged period of economic distress. The primary factor for the glum outlook: surging energy costs and inflation levels not seen in decades.
"It doesn't feel like there's a bubble bursting all at once. No defining event," Schlesinger said, noting the difference between this period and the years leading up to the Great Recession in 2007-2009. "Sometimes the very best advice is when, you know, that little devil on your shoulder says, 'Do something,' I turn it around and I say 'Don't do something, just sit there.'"
Indeed, anyone sitting down on Monday could be forgiven for squirming after stocks took another nosedive: the S&P 500 dropped 151 points, or nearly 4 percent, to close at 3,750. Since January, the S&P has fallen 21 percent since January.
Also on Monday, the Dow Jones Industrial Average tanked 876 points, or 2.8 percent, and the Nasdaq Composite fell by 4.7 percent.
"You have to remember that you're not investing for the next six months or even the next few years. You're investing for decades in the future," Schlesinger said. "Even if you're retiring next year in your 60s, that money has to last you two or three decades."
In 2007, the failure of banks to back up mortgages led to Great Recession. Americans stopped spending, companies stopped earning, which then stopped hiring.
Unemployment grew up from 5 percent to 9.5 percent over the ensuing two years, while the poverty rate jumped from 12 percent to 15 percent. Household net worth, meanwhile, lost a whopping $16 trillion in value.
Mike Klein, a manager at Peter's Billiards in Minneapolis, told WCCO he's optimistic we are not in for a repeat of that dreaded period in American history.
"Locally, we buy printing material, we buy packing material for when we ship things, so that's helping the local economy," Klein said. "But then all of our manufacturers, 80 percent of our products are made in the U.S., so we help people employed in the U.S. by selling and promoting their furniture. We've lived through these cycles before, so we've got that experience."