What Is a Recession? Ep. 110

The media and the government have gotten creative with answering whether we are in a recession or not in order to make our economic situation better than reality. The traditional definition of a recession is being redefined. Historically, the definition of a recession has been two negative quarters of growth in the gross domestic production. In the first quarter of this year the GDP declined -1.16% and at the end of June the second quarter reading was -0.90%. We are by definition in a recession.

According to Tom Siomades , the chief investment officer of AE Wealth Management, the average recession has lasted on average six to twelve months since World War II. He states in recent commentary that we should be mindful of the possibility of another six months of negative economic growth.

Remember, we want three types of funds: Liquid, protected, and growth. Check out last week’s newsletter for a description of the three types of money.

We have become increasingly spoiled by the market popping back up after recent downturns like it did in 2020. This pop effect is due in large part to the government intervening in the markets to stabilize them. Now the government is on the other side of the table from investors.

Simodaes stated, “We are not seeming impetus for the market to come back up.” Why? Because if the government lowers interest rates or uses quantitative easing to create more new money, inflation runs away.

If you’ve lost money in the first half the year, brace yourself for the possibility of more losses. This may not be a bad thing if you’re properly allocated and have a plan in place. If you’re winging it right now though, you have reason to be concerned.

The government’s hands are tied with how much they can help the economy bounce back this time. This is a problem for folks who have gotten used to the market bouncing back and taking off for more growth. This may not happen this go around. It may take longer for the economy to right itself.

Adding lighter fluid to the issue is the Federal Reserve has not stated what it’ll do at its September meeting. They could give forward guidance as to where rates may go but they are not, which is driving market sentiment down. 

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel. The use of logos and/or trademarks of podcast hosting sites are the property of their respective owners and are not an endorsement by those owners of our firm or our program.

Episode Transcript

SPEAKER_00 (00:00):
Welcome to the Excel in Retirement Show, where
financial planning becomesunderstandable.
Your host, David C.
Treese, is a licensed financialadvisor who specializes in
retirement income planning.

(00:21):
David's desire for each of hisclients is to have financial
confidence, protection, andgrowth.
We believe this is achievablewith the right plan in place.
Together, we'll build a planspecific to your financial
goals.
We work with clients all over,and we'd love to connect with
you.
Go to clientsexcel.com toconnect with us.

(00:43):
If you'd like to speak with us,call our office at 864-641-7955.
Thanks for listening.
Now to the show.

SPEAKER_01 (00:58):
Welcome back to the Excel in Retirement show.
My name is David Treese and Iappreciate you listening here
today.
We'll see you next time.

(01:36):
How annuities work, differenttypes of life insurance.
We recorded an episode early onon Social Security and Medicare
and so forth and just thedifferent ways that we help

(02:03):
folks.
and a successful retirement.
Well, did your parents everleave you a list of chores to do
when they left for the day?
Imagine being a teenager.
Think back to those days, and itwas summer break, and your
parents would leave you a listof things to do, maybe.

(02:23):
That's how my parents did it.
They would leave me and mysister, she was about four and a
half, four, almost five yearsolder than me, and she would
leave, my mom would leave us alist of things to do, and we had
better have them done by thetime they got back home, my
parents got back home.
We'd get up And we'd look atthat list and then we'd
procrastinate.
We might go back to sleep or wemight watch our favorite TV

(02:45):
show.
Then the phone would ring a fewhours later.
We knew it would.
It was mom asking how our daywas going.
And of course, she wanted toknow how the chore list was
going.
Now, it was really easy in themoment to get creative in how we
answered her questions about ourprogress, right?
It's always tempting to fudgethe truth a little bit to make

(03:08):
the situation better thanreality when you're a kid like
that.
The idea that we can redefinethings is on the table right now
when it comes to what arecession is.
The media and the governmenthave gotten really creative with
answering whether or not we arein a recession or not.

(03:29):
it is like they're trying tomake the economic situation
we're in today a little bitbetter than it is in reality.
The traditional definition of arecession is defined as– gross
domestic production, or GDP.

(03:51):
In the first quarter of thisyear, 2022, GDP declined
negative 1.16, and at the end ofJune, the second quarter, the
reading was negative 0.90.
So we are, by definition, in arecession at this point.
According to Tom Siamatis, thechief investment officer of AE

(04:11):
Wealth Management, and we'lllink to this commentary in the
show notes, the averagerecession has lasted, on
average, 6 to 12 months sinceWorld War II.
And so Tom states that theaverage recession is 6 to 12
months since World War II.
So we might be six months intoit, and we might not be.

(04:33):
We don't know.
He states that in his recentcommentary that we should be
mindful of the possibility ofanother six months of negative
economic growth at minimum.
If you've lost money in thefirst half of the year, Brace
yourself for the possibility ofmore losses.
That's how I interpret that.
This may not be a bad thing,though, if you're properly

(04:55):
allocated or the impact of itcould be diminished if you're
properly allocated, we believe.
If you're winging it right nowand you don't really have a
written plan in place, then youhave reason to be concerned, my
friend.
Remember, we want three types offunds in our retirement
portfolio.

(05:16):
We want liquid money, we wantprotected money, and we want
growth money.
If you go back to episode 109last week, we talked about these
three types of money.
So I would encourage you to goback and listen to that if
you're curious about the threedifferent types of money that
you need in retirement.
We have become increasinglyspoiled by the market popping

(05:37):
back up after recent downturnslike it did in 2020.
This pop effect is due in largepart to the government
intervening in the markets tostabilize them.
Now the government is on theother side of the table from
investors, and this is unique tothis situation.
Sayamata stated, we are notseeing the impetus for the

(05:58):
market to come back up.
We're not seeing the impetus forit to come back up.
Why?
Because if the government lowersinterest rates or uses
quantitative easing to createmore money, then inflation is
going to get away from us again,and it doesn't appear to be
coming down anytime soon.
The government's hands are tied,I would say, in how much they

(06:20):
can help the economy bounce backthis time.
This is a problem for folks whohave gotten used to relying on
the market bouncing back andtaking off for more growth.
This may not happen thisgo-around, I have to warn you.
It may take longer for theeconomy to right itself.
Adding lighter fluid to theissue is the Federal Reserve has

(06:43):
not stated what it'll do at itsSeptember meeting yet.
They could give forwardguidance, as they often do, of
where rates may go, but they arenot, which is driving down
market sentiment, and it makesit hard for investors investors
to have faith in the markets andso it keeps people on the

(07:04):
sidelines oftentimes.
The value of a written financialplan for how to navigate these
times can't be understated intimes like these.
There may be proactive stepsthat you can take now to help
yourself have the best outcomein retirement that you possibly
could.
If you'd like to explore thismore, please call our office and

(07:26):
schedule a complimentary15-minute call to discuss your
situation.
There's no cost or obligation tothat, and we would be happy to
provide insights there if we donothing else.
And we would be happy to helpyou create a written financial
retirement plan.
Our telephone number is 864-641Investing

SPEAKER_00 (07:58):
involves risk, including potential loss of
principal.
Transcription by CastingWordsClients Excel is not permitted

(08:39):
to offer and no statement madeduring this show shall
constitute tax or legal advice.
Our firm is not affiliated withor endorsed by the U.S.
government or any governmentalagency.
The information and opinionscontained herein provided by
third parties have been obtainedfrom sources believed to be
reliable, but accuracy andcompleteness cannot be
guaranteed by Clients Excel.

(09:01):
The use of logos and ortrademarks of podcast hosting
sites are the property of theirrespective owners and are not an
endorsement by those owners ofour firm or our program.