When it comes to the question of whether Americans are in a recession – or headed for one in the near future – financial advisors are pessimistic.
In a survey of close to 300 financial advisors who participate on SmartAsset’s SmartAdvisor matching platform, 80% of respondents said that Americans are already in a recession or would enter one in the next 12 months.
The survey, which was conducted between Aug. 2 and Aug. 16, posed the question “Do you expect the U.S. economy to enter a recession in the next 12 months?” Here’s how the numbers broke down.
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Are We Headed Toward a Recession? Advisors Say ‘Yes’
When asked “Do you expect the U.S. economy to enter a recession in the next 12 months?” 43% replied “Yes” and another 37% said that they think we’re already in a recession. Just 20% said that they didn’t think a recession was coming in the next year.
"The advisors in our firm believe we are currently in a textbook recession defined by real (gross domestic product) growth," wrote Matthew Lamb, president and wealth advisor at Marvel Wealth Management, who participated in the survey. "The question is not 'Are we?' but rather, 'How long will this endure?'"
What the Data Says About Whether We're in a Recession
While advisors overwhelming concluded that the U.S. is in recession territory, the data tells a more complicated story - and the story is far from over.
Just before the survey went live on Aug. 2, the U.S. government confirmed that gross domestic product (GDP) declined 0.9% in the second quarter of 2022. That followed a contraction of 1.6% in the first quarter. This news caught analysts’ attention: Some experts point to back-to-back quarters of negative growth as a sign of a recession.
It doesn’t constitute an official definition, though. Instead, the National Bureau of Economic Research makes that determination from various data including employment metrics, consumer spending stats and industrial production.
And in the weeks immediately following that GDP report, a number of data points have complicated the picture. On Aug. 10, the Bureau of Labor Statistics reported that the seasonally adjusted consumer price index held steady in July versus June, showing signs of cooling inflation. Meanwhile, the July jobs report, announced in early August, came in far better than expected, with the economy adding more than 500,000 jobs and the unemployment rate dropping to 3.5%, hitting its pre-pandemic level.
The stock market has likewise confounded easy narratives about the trajectory of the economy. In the two months since the market bottomed out in mid-June, the S&P 500 rose over 17% - before falling about 5% in the second half of August.
For some advisors, the low unemployment rate, in particular, is cause to doubt that a recession is around the corner. "I am doubtful that we are entering a recession," wrote Patrick N. Stoa, a certified financial planner, who responded "no" to the survey query. "As long as the vast majority of people are working, it is hard to see a recession. People that are working keep buying things and pulling the economy through."
And the recent spate of positive economic news had at least one "yes" voter suggesting that a brief recession had already come and gone.
“I believe that the U.S. has arguably already entered and left a recessionary period earlier in the year,” wrote Michael Collins, CEO and founder of WinCap Financial, who responded "yes" to the survey. Inflation and other factors, he says, "likely caused many consumers to shift or delay spending. As prices and valuations have eased in the last few months, with some supply chain relief in sight, the consumer should return to more normalized spending patterns.”
Bottom Line
Despite conflicting economic data, advisors resoundingly believe that a recession is imminent - or already in effect.
Many advisors agree, however, that economic anxiety shouldn’t result in panic-selling investments or abandoning financial plans. “We believe these events will always occur and (you should) stick with your financial plan to ensure the best outcome for your portfolio,” Lamb wrote.
Data and Methodology
Survey data for this report was collected by SmartAsset between August 2, 2022, and August 16, 2022. We asked financial advisors, “Do you expect the U.S. economy to enter a recession in the next 12 months?”
Answers available were:
- Yes
- No
- I think we're already in a recession.
Of the advisors surveyed, 275 responded to this question.
Tips on Investing During a Recession
- One of the benefits of working with a financial advisor is having someone who can temper an investor’s emotional responses to economic uncertainty with objective analysis. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Additional reporting by Wola Odeniran
Questions about our study? Contact us at press@smartasset.com
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