Is Recession Looming?

By Generational Equity


The answer is yes according to a recent article in the Financial Post. According to their sources, the odds are increasing that we will experience a recession sometime in 2023. Here is how they describe the situation:

Economists at Deutsche Bank split from the pack last month when they called a U.S. recession, but they figured they wouldn’t be lonely for long. They argue that the United States will fall into recession late in 2023 as the U.S. Federal Reserve raises rates more aggressively to deal with inflation now running at a four-decade high – and likely to remain well above target through next year.

“Our call for a recession in the U.S. next year is currently way out of consensus,” economists David Folkerts-Landau and Peter Hooper said in their report last month. “We expect it will not be so for long.” And it wasn’t. Bank of America strategists warned a few days later that inflation could tip the U.S. into recession.

And according to Lawrence Summers, former Treasury Secretary:

America has never experienced inflation above 4% and unemployment below 4% without an economic slump following within two years. In March consumer prices are estimated to have soared 8%, with the jobless rate sitting at 3.6%, Bloomberg reports.

“The combination of overheating, followed by policy delay followed by supply shocks means I think it’s a very difficult set of challenges, and recession in the next couple of years is clearly more likely than not,” Summers said. “I suspect that’s how the consensus will evolve.”

Because inflation is running at a four-decade high right now, the Fed will most likely continue to raise interest rates to combat it. Most economists believe the Fed will raise rates by 50 basis points at each of the next two meetings in June and July, followed by 25 bp rises at the remaining meetings, putting the rate at 2.6% by year-end. More hikes next year will bring the rate to 3.6% by June 2023.

The good news is Deutsche sees a “mild” recession…..

What does all this mean to business owners? Frankly, the window on the strongest seller’s market will be likely closing sometime towards the latter part of 2023. The really good news is that we are not even halfway through 2022, giving you ample time, if you move quickly, to take advantage of the current seller’s market. 

Now history tells us that even during recessions, businesses can find buyers; certainly valuations will dip a bit and it is harder work to find an optimal buyer during recessions, but it can be done. However, you may have to wait until the next seller’s market in 4-5 years' time if you miss this one.

The American business owner landscape is full of horror stories of entrepreneurs that did not move in 2007 only to be derailed by the financial crisis and recession of 2008 and 2009, forcing many who survived to wait several years before exiting. 

To learn more about how Generational can help you successfully navigate the next 12-18 months, you should set aside some time and invest it with us by attending a Generational Growth and Exit Planning Conference near you.

You will gain a wealth of information about what you need to do to build a buyer ready business in today's and tomorrow’s pending economic environment. To find a conference near you and to register to attend, please click here.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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