Recession roundtable: Advice from experienced advisors

If you’ve been following the news, or perhaps had a conversation with your well-read uncle during the holidays, there is a good chance you’ve heard the murmurs of a potential recession coming.

It’s hard to blame those for speculating. We are currently in the longest recorded economic expansion in U.S. history at 128 months, and anyone who has taken an Economics 101 class learns that economic expansions eventually peak and are followed by a recession.

Given this — and the recent market and political uncertainty around the ongoing trade war, coronavirus, yield curve inversion, impeachment proceedings and Brexit (to name a few) — there has been plenty of media attention around this “looming recession.” 

But I’m not going to spend time discussing whether there will be a recession. The next recession could be in 2020, 2025 or even longer (Australia hasn’t experienced a recession in 28 years). The truth is, no one really knows when the next recession will be, and any predictions you read or hear are purely speculation. The fact is that at some point, yes, there will be another recession.

Knowing this, I would like to focus on what we can control. Before the next recession does come along, what advice can we share with you to help you prepare for it? Let’s turn to a few of Wipfli Financial’s most experienced advisors for their perspectives:  

What can you be doing in anticipation of the next recession? 

Pat Brault

Patrick W. Brault, CPA, CTFA | Principal, Senior Financial Advisor

“As always when it comes to long-term investing, our advice to our clients is focus on what you can control. The capital markets are efficient, and there are cycles investors must ride out (and the timeline varies). What we can do as advisors is continually monitor both the risk and return expectations of our clients, along with their financial life projections. By having ongoing dialogue with our clients, our hope is to help them quantify a level of risk they can tolerate when the next recession appears. We have no crystal ball to forecast the next recession. Instead we help investors prepare for it well before it happens.”

Lora Murphy
Lora Murphy, CPA, CFP®, CDFA® | Principal, Senior Financial Advisor, Director of Business Development

“Quit reading the headlines of newspapers and magazines! Turn off the finance shows!

Remember that a solid financial plan should have factored in possible future market corrections. A good plan also should take advantage of tax-loss harvesting opportunities during market volatility, which will be used to offset future capital gains. 

Please schedule a meeting or phone call with your financial advisor if you still have questions or need some reassurance.”

Mark Albers 

Mark Albers, CPA, MST, CFP® | Principal, Senior Financial Advisor

“It’s good to have discussions now so we can have them without the angst that can accompany a recession. I like to remind clients that, while we may not know when the next recession will come, we are already prepared by having an appropriate asset allocation and a plan. Our portfolios are built to weather periodic storms. It helps to talk about what we will do (e.g., tax loss harvesting, rebalancing and Roth conversions) to be opportunistic during the downturn, as well as what we won’t do (e.g., make rash or reactionary decisions) so we all know what to expect when the time comes.”

So what are the key takeaways on how to prepare for a recession?

1. Have a financial plan:

If your investments go down in any given year, do you know what the implications of that are on your overall financial picture? For most people, the answer is likely no. Having a holistic financial plan in place can help you see the bigger picture and perhaps ease the uncertainty that often accompanies a recession. It may even help you sleep better at night!

2. Ignore the headlines:

Remember in today’s media, individuals are incentivized to generate clicks and drive traffic to their news website. At the end of the day, any predictions of a recession are purely speculation.

3. Review your risk tolerance:

Having a proper mix of stocks and bonds in your investment portfolio based on aspects such as your risk tolerance and time horizon is vital to ensure you can weather periodic market downturns. A long-term, disciplined investment strategy is designed to help you avoid making reactionary changes to short-term news.

4. Be opportunistic:

When the next recession does come, there are strategies you can employ, such as tax loss harvesting, Roth conversions and portfolio rebalancing.

5. Be prepared:

Most importantly, be proactive and have discussions ahead of time! Embracing the concepts above is hopefully going to boost your financial confidence, and maybe you’ll have a better response for your uncle Bob next holiday season.

If you have any questions or would like help developing a plan, contact an advisor at Wipfli Financial.

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Recession roundtable

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services and fees is set forth in Wipfli Financial’s current Form ADV Part 2A brochure, copies of which are available from Wipfli Financial upon request at no cost or at www.adviserinfo.sec.gov. Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Cole Gustke
Cole Gustke

Associate Advisor

Cole Gustke is an Associate Advisor with Wipfli Financial Advisors, based in Wausau, WI. He works collaboratively with a team of financial advisors to provide comprehensive financial planning and investment advisory solutions to individuals, families, small businesses and retirement plans.

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Recession roundtable: Advice from experienced advisors

time to read: 3 min