IS A RECESSION COMING?

Is it already here? If so, what should business owners and individuals do to protect their company and their assets? New England Living spoke to William Cooper of the accounting firm Walter Shuffain in Boston for his thoughts. Cooper has more than 30 years of experience in public accounting, is a registered investment advisor, and serves as a trustee for many of his clients.

BY ROB DUCA

Q: Are we already in a recession?

A: There are components of what would be a recession. We’re dealing with significant inflation, yet we still have a major labor shortage and supply chain issues, which doesn’t speak of a recession but of too much demand. That’s a positive thing. But we’re in a weird place with COVID that created supply chain issues, and now we have crazy pricing issues. So, I don’t think we’re in a severe recession, but if you look at all the factors, you’d have to say there is the risk of a recession.

Q: During a recession, what steps should be taken as a business owner and as an individual?

A: I always tell people that it’s a good opportunity to clean up your business or even in your personal life to trim the fat to make sure you’re operating at peak level to get through the tough times. Then, when the economy comes back, you’re in a great position to move forward.

As a business owner, go through your expenses and make sure that all your expenditures are 100 percent necessary. Look at the marketing or travel budgets, for example, to see how effective they are. When things turn around, you’ll have a streamlined business, and profitability will be much more significant.

With individuals, one of the biggest things I see is people panicking. They try to time the market and switch to cash. People who panic and liquidate to cash invariably loose. Look at 2008-09; the market was back by 2010. Those people who went to cash halfway through the downturn lost out. Over a ten-year period, the market always goes up.

Now, if you have a short-term need for money, you should protect your principal and avoid investments that have volatility. You will lose out on some of the upsides, but you’ll be protected against the downside. But typically, you make out by staying the course.

It’s never a bad thing to cut excess. But the job market remains strong and major layoffs haven’t happened yet. If the labor market turns the other way, then you really want to be saving for a rainy day.

Q: What precautions should I take to protect my financial future?

A: It's a unique time and people just need to be aware and make decisions accordingly. Don’t think you need to start cutting back and hunkering down. But you need to keep your eye on it. The best advice I can give is to be vigilant, but don’t panic.

Q: Should I stop investing in my retirement account during a recession?

A: No. Creating that savings and letting that money grow tax-deferred is such a huge benefit. If you do it on a regular basis, you’re getting the benefit of the ups and downs. NEL