The recession has become the talk of the town again in the U.S. economy and financial markets, with many leading downturn indicators flashing red.
In March, The Conference Board’s Leading Economic Index slumped to its lowest level since November 2020, declining by 1.2 percent and deepening into contraction territory.
The spread between the two- and 10-year Treasury yields, which has forecast nearly every recession since the Second World War, settled the April 20 trading session at negative 60 basis points. The gap has widened since July 2022. The Federal Reserve’s preferred recession measurement—the three-month and 10-year yields—finished the session at negative 158 basis points.
Minutes from the Federal Reserve’s Federal Open Market Committee (FOMC) policy meeting in March revealed that central bank economists expect a recession later this year as the fallout from the banking turmoil spreads throughout the national economy.
Other economists and market experts agree. A recent Marquee QuickPoll for Goldman Sachs, for example, revealed that 53 percent of investors expect a recession this year.
“I believe that a near-term recession is more likely than unlikely. It will be very difficult for the Fed to engineer a soft landing for the economy and still win the battle to stem inflation,” Robert R. Johnson, a professor of finance at Creighton University’s Heider College of Business, told The Epoch Times. “The problem with recessions is that we don’t know we have entered one until after the fact, and we also don’t know we have exited one until after the fact.”
But for many Americans, the recession might already be here.
According to the CNBC All-America Economic Survey, 66 percent of Americans think the United States is headed for a recession or is already in one. Moreover, a January Morning Consult study found that 46 percent of U.S. adults believe the nation is entrenched in a recession.
How should investors prepare for this environment if a recession is on the horizon or has arrived?
Navigating the Markets
Despite bank failures, credit contraction, and tightening lending standards that might slow the economy, this “does not mean you can’t make money in stocks,” according to Nancy Tengler, the CEO and CIO of Laffer Tengler Investments, in a note.
Johnson thinks recessions could be an opportunity to enter the market or build on existing positions “as stocks are selling at prices below previous highs.”
What exactly should you be looking for in today’s climate? According to Ben Fraser, the CIO of Aspen Funds, it is paramount for investors to possess “diversification” in their portfolios.
“Having diversification across multiple investment asset classes and strategies will soften the impact of a recession,” Fraser explained to The Epoch Times.
Michael Collins, the founder and CEO of WinCap Financial and professor at Endicott College in Massachusetts, shares this recommendation about diversification. He told The Epoch Times that investors need to concentrate on “diversified, long-term investments and seek out deflation-resistant, stable investments.”
“This should include investments in blue-chip stocks, bonds, and low-risk mutual funds,” he said. “Adding gold and other precious metals can also be beneficial as a hedge against inflation and market declines.”
Investment diversity has been the go-to recommendation for many financial experts, but the limited research on this subject suggests that only a third of investors ensure their investments are diversified.
At the same time, not everyone is in lockstep with diversification, including billionaire investor Warren Buffett, who asserted that the strategy “makes very little sense for anyone that knows what they’re doing.”
“It is a protection against ignorance,” Buffett said.
Investors can also shift their investment portfolios to defensive sectors “that are less affected by slowing economies,” says Richard Gardner, the CEO of financial technology firm Modulus. This includes health care, consumer staples, and utilities.
It could also be a perfect time to “investigate the financials of your investments,” Gardner told The Epoch Times.
“Stick with companies that have the balance sheet and cash reserves to make it through the storm and come out the other side,” he noted. “This is particularly valuable when taking a long-term approach to investing.”
With governments worldwide investing significant taxpayer dollars in the green energy industry, even as economies might be heading into a recession, Tengler thinks this could be an exceptional trading opportunity.
Tengler has picked potential investment options for green tech, metal, miners, and hydrogen.
“We also like the clean-energy commodities and have recently added to some of those names as well as energy yesterday and continue to add to consumer discretionary,” she stated. “Focus on reliable earners with great, seasoned management teams.”
Bonds and Gold
The global bond market has been volatile over the last 18 months, whether in the U.S. Treasury arena or the U.K. gilts. Heading into 2023, the Barclays Global Aggregate Bond Index—a benchmark of about $70 trillion of sovereign and corporate debt—had tumbled nearly 5 percent since 2021. But many of these indexes have rebounded so far this year, such as the Vanguard Total Bond Market ETF (3.2 percent), iShares Core U.S. Aggregate Bond ETF (3.2 percent), and SPDR Portfolio Aggregate Bond ETF (3 percent).
For years, standard investment advice has been to invest in bonds during a recession since these instruments offer regular cash flow, a predictable fixed income, and a reduced chance of losing your principal. Long-term bonds have been a reliable pick during five of the deepest recessions in the last century, says John Rekenthaler, a member of Morningstar’s investment research department.
“Through each of the five deepest recessions during the past 100 years—two of these have occurred within the past 20 years, so this is not just ancient history—long government bonds not only turned a profit but also outdid Treasury bills,” he wrote in a report. “On four out of those five occasions, equities crashed. Long Treasurys have therefore offered strong protection against stock market declines caused by economic weakness.”
In addition, it is worth noting that interest earned from Treasurys and money markets are not subjected to state and local taxes, although they face federal levies. By comparison, a certificate of deposit (CD) offers higher rates but will be slapped with federal and state income taxes.
For the broader economy, Morningstar analyst Sandy Ward recently stated that the bond market is flashing red, signaling recession, rising credit stress, and weakening economic conditions.
Gold is another safe-haven asset put forward by financial experts.
The yellow metal has trended higher since November on a weaker greenback and the Federal Reserve’s easing monetary policy prospects. Year to date, gold prices are up nearly 10 percent and recently flirted with the August 2020 record high of $2,069.40.
Gold is typically sensitive to interest-rate movements because they can affect the opportunity cost of holding non-yielding bullion. The buck’s performance can make dollar-denominated commodities more expensive or cheaper for foreign investors.
The other factor has been weakening economic data, says Stephen Akin, a registered investment advisor at Akin Investments.
“The primary fundamental event that propelled gold well above $2,000 was weaker U.S. economic data,” he told The Epoch Times. “This data suggest that the Federal Reserve could certainly consider slower rate hikes and a pause of rate hikes sooner.”
Collin Plume, the CEO of Noble Gold Investments, would not be “surprised if 2023 saw a new record high for gold prices” as the global economy “teeters on the edge of recession.”
Emerging Markets
Some experts believe it would be advantageous to consider emerging markets, such as Brazil, China, and India—with or without a recession.
This could be a prudent step, considering that the International Monetary Fund (IMF) forecasts that emerging markets and developing economies will expand by 3.9 in 2023 and 4.2 percent in 2024.
“If we avoid a recession, it may be worthwhile for investors to look more closely at emerging markets which often can provide higher returns but assume a greater risk,” Gardner stated.
Stocks with “upside potential” should be assessed as options for a recession-era investment strategies, including riskier assets.
“This could include investing in riskier assets such as small-cap stocks, venture capital, and commodities,” Collins said. “Investors should also consider adding international investments to their portfolios and investing in sectors that are expected to grow in the long-term, such as technology and healthcare.”
According to Emily Leveille, the portfolio manager and managing director at Thornburg, traders should reconsider international equities, purporting in a note that valuations are generally lower than in the United States.
“Over the past 10 years, foreign markets have traded at a discount to the U.S. that has widened since COVID,” Leveille wrote in a research note last month. “If the U.S. market indeed falls into recession this year, and equity prices contract further, the ex-post valuation disparity will have shown itself to be even wider.”
A peaking U.S. dollar, lower energy prices, and China’s economic reopening would be other reasons to incorporate emerging markets into portfolios.
Where Is the Market Headed?
Despite everything that has transpired in the first few months of the year—from higher interest rates to banking turmoi—the leading benchmark indexes have held steady.
Year to date, the Dow Jones Industrial Average is up 2 percent, the Nasdaq Composite Index has rallied more than 15 percent, and the S&P 500 Index has surged nearly 8 percent. So, where does Wall Street think the market is headed for the rest of the year?
The present risks to the equities arena are earnings cuts and valuation adjustments. Monetary policy could also affect the direction of stocks. Investors are penciling in one more rate hike at the May FOMC policy meeting and planning for rate cuts later this year and heading into 2024 in response to slowing economic conditions, according to the CME FedWatch Tool.
A February 2023 Reuters poll found that strategists expect the S&P 500 will finish the year at 4,200. The index has been trading at around 4,100.
But while industry observers are always on the hunt for trends, the rest of the year may be a time for the stock market to be stuck in “limbo,” says Jurrien Timmer, the director of the global macro in Fidelity’s Global Asset Allocation Division.
“Indeed, the cycle seems to be meandering without a clear inflection,” he wrote, adding that fund flows are displaying “neither hope nor despair.”
“A period of ongoing base-building may lie ahead for the market,” he said. “For investors, the key for now is patience.”
Article cross-posted from our premium news partners at The Epoch Times.
Bypass Big Tech Censors
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.