The Bureau of Economic Analysis (BEA) reported on July 28th that U.S. Gross Domestic Product shrank by 0.9% in the second quarter of 2022. While the White House, members of Wall Street, and other financial analysts alike were reluctant to call it such, the U.S. is experiencing its second consecutive quarter of negative GDP growth, meaning current economic conditions meet the strict definition of a recession.
If you are currently retired, or saving for retirement, a prolonged recession could easily drain your retirement nest egg. Today, the team at Crash Proof Retirement® would like to share our analysis of the second quarter’s dismal GDP report and give you some tips on how you can protect your retirement investments from a recession — or worse.
Gross Domestic Product and the Overall Economy
The GDP of a country represents the value of all the goods and services sold in that country over a period of time. When GDP is positive, it means that the economy is expanding; when it shrinks, it means the economy is retracting. Although this does not paint the whole picture of the economy, financial experts place a great deal of importance on GDP when assessing the overall health of the economy.
The BEA’s report shows that, after experiencing unprecedented growth throughout 2021, the U.S. economy has slowed down significantly. This comes as little surprise to some analysts, who have been predicting a recession since last year. Since the start of the year, several factors indicated that a recession would transpire sometime in 2022. First, the Federal Reserve announced a tapering of its Quantitative Easing (QE) program, an economic stimulus measure designed to prop up the stock market after the 2008 crash. This measure successfully facilitated a rebound of the ailing economy we experienced during the financial crisis of 2008, and it was implemented again after the COVID-19 crash of 2020. When the Fed started to taper QE, most financial experts expected some degree of economic slowdown to follow, but some are now trying to change the strict definition of a recession.
Second, the Federal Reserve’s Open Market Committee has raised its benchmark lending rate four times so far in 2022, leading to higher borrowing rates for Americans around the country — and the Fed is expected to continue aggressively raising rates for a fifth time in September. The first rate increase of 25 basis points in March was just the beginning. The rate was raised again by 50 basis points in May, followed by two 75-basis-point hikes in June and July. Rate hikes are designed to combat inflation, but they have historically had the unintended consequence of causing the stock market to decline. With soaring mortgage rates and limited access to consumer credit, sales of big-ticket items like homes and vehicles have declined accordingly. Additionally, consumer debt has reached an all-time high over $16 trillion and with interest rates on the rise, much of this debt will become more expensive for Americans to finance, which could open the floodgates for a debt crisis.
Protecting Your Nest Egg from Stock Market Crashes
Although the stock market has increased since the initial second quarter GDP report was released, the potential for big losses in the future still exist. As the full effect of the Fed’s QE tapering and interest rate hikes sink in, the stock market is bound to respond with a bigger slump than what has already been experienced. A third quarter of negative GDP growth would make a recession undeniable and could easily send the stock market plummeting as we approach the end of the year. If you are invested in risky securities-based investments like stocks, bonds, and mutual funds, now is the time to protect the value of your nest egg before the stock market takes another hit.
Millions of securities investors lost big during the market crashes of 2008 and 2020, but those who protected their money with the proprietary Crash Proof Retirement® System enjoyed peace of mind knowing that their money could not be taken away. If you want to know how to achieve a Crash Proof Retirement®, schedule an appointment to speak with one of our licensed retirement phase experts today. The team at Crash Proof Retirement® has helped more than 5,000 consumers find peace of mind with safe alternative investments that credit interest directly to your accounts which cannot be lost or taken away. Unlike risk-based securities, the exclusive Crash Proof Retirement® System is guaranteed to protect your principal no matter what happens to the stock market or the economy. If you are interested in retirement planning in Delaware County or anywhere nearby, call 1-800-722-9728 or fill out the form on our contact page to schedule your free financial checkup right away.