I see an interesting and pervasive problem: Everyone’s looking for clues as to when the economy will rebound and get back to where it was for the last handful of years or so. Here’s why that’s a problem and what you should do instead.
Right now, we’re experiencing a level of inflation that we’ve not seen in four decades. That’s a long time – longer than many of you have been around. That’s why I’m here to tell you that looking for things to bounce back to the way they were pre-pandemic is a mistake – unless by “pre-pandemic,” you mean going back to the 1980s.
I’m betting that you don’t mean that, but maybe you should.
Stop Looking for a Rebound
You see, looking for things to rebound to where they were a handful of years ago isn’t the solution right now. We’re dealing with a confluence of economic issues that continue to drive the economy, even in the face of high inflation. Wages have risen and may continue to rise, and the job market is still relatively strong (despite news of significant layoffs, specifically in tech-driven companies, regardless of industry). On a day-to-day level, people aren’t quite as fearful as the news makes us out to be.
We’re in a tough spot. Let me rephrase that: Fed Chair Jerome Powell is in a tough spot because he’s doing exactly what needs to be done to get the hot spots in the economy to cool off a bit – and while he’s doing it, he’s getting ripped apart by politicians and investors and the media. I say, good for him.
You see, you’d have to go back to the 1970s and 1980s to find inflation rates like we’re experiencing today, and to get that under control back then, interest rates had to rise. There simply was no other way to cool things off. And, as we know, things got back on track and we all had a pretty good run for many years.
If you’ve only experienced the “good” times – times of low-interest rates, along with stock markets and housing markets that have only gone up, up, and up some more, then these seem like dark days. But the fact of the matter is that this is a normal cycle that was kept unnaturally at bay for decades, which is part of the reason why we find ourselves where we are now. And a whole confluence of additional challenges, kicked off by a global pandemic, have dug us even deeper.
What Do I Suggest Instead?
The way I see it, our economy is about more than simply how we’re feeling at the grocery store or the gas pump. The health of our economy underpins the health of our democracy.
Yes, that’s a bold statement, but there’s a lot of truth to it, in my opinion.
Economic distress fuels emotional distress, which fuels divisiveness and discontent. We have more than enough of those right now, so in addition to easing economic strain, Jerome Powell carries the herculean responsibility of keeping our country together. It’s a tremendous task, more so than most politicians, economists, and others have to bear.
Advisor Channel: Visual Capitalist
It also means that we need a collective reality check on where things stand. How much has your life changed over the last year, economically speaking? You may not go out to eat as often or choose less-expensive restaurants. You may keep your car for another year or two rather than buy or lease a new one. You may decide that going back to the office so that you can keep your job and benefits is a fair enough deal.
And you may even decide that now actually could be a good time to buy a house – the competition has eased since the thick of the pandemic, and you can take a little more time to consider your options and get that inspection that your peers skipped out on. You gain mortgage-interest tax deductions and even if you’re paying more in interest now than you’d like, you’ll always have the option to refinance down the line.
Don’t look to the 2010s for answers; look to the 1980s for direction.
You Have More Control Than You Realize
It’s about being smart with the decisions you make. The free-for-all lifestyles that were enjoyed for the last bunch of years may be scaled back a bit. But, economically speaking, you’ll be okay – most people come out of recessions just fine. Consumer confidence is far from the lowest it has been before; in fact, it’s still in a range that’s considered pretty high.
Read the tape and it’ll prepare you for what you need to do, regardless of what side of the aisle you’re on or where things land this election season.
The Confidence Board
And remember this: Inflation’s not just a pricing indicator – it’s a proxy for confidence in the United States as a whole. When there’s the erosion of the dollar, there’s the erosion of confidence in everything we’ve worked to build here. A healthy economy is a reflection of a healthy country; the opposite is true, too, and you need only to look around the world at faltering countries to see that for yourselves.
So, when Powell talks about getting inflation under control, what he’s talking about is keeping our country whole. Let’s do our best to support him in that.
Let’s reset, not rebound.