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Tag: recession

  • 3 Strategies That Helped My Business Survived 2 Recessions | Entrepreneur

    3 Strategies That Helped My Business Survived 2 Recessions | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Last year, the U.S. reached its highest rates of inflation since 1981—8.5% in July — shocking American consumers and bottlenecking the economy. Additionally, the U.S. Bureau of Labor Statistics reported a 4.5% increase in labor costs last year, which helps workers keep up with inflation costs but places small businesses in a challenging position of losing out on profits and growth.

    While business owners grapple with price increases on goods and services, fallback in American spending and increased labor costs, the question of how to effectively market during a downturn becomes prominent.

    Since I founded my business PostcardMania in 1998, I’ve encountered many different challenges along the way, including establishing an in-house direct mail printing facility and beating out my competitors. I’ve also survived two recessions; each one resulted in different outcomes for my company.

    Today, I share the lessons I learned during those economic setbacks with anyone and everyone who wants to build a strong business that can withstand anything thrown at it. I’m relieved to say that PostcardMania grew last year despite terrible economic conditions — we had 15% growth in annual revenue and 7% growth in hiring.

    I’ve narrowed these life lessons down to three key principles you should follow during an economic downturn. These principles have also been verified by extensive research on the subject, which I’ll share below as well.

    Related: 5 Ways to Sustain Company Growth During a Recession

    1. Maintain (or even increase) your marketing

    Whatever you do during an economic crisis, do not stop marketing. If there is anything you take away from reading this article, it’s that.

    I learned this firsthand during the recession of 2008. Back then, 46% of our revenue came from clients in the mortgage and real estate industries. When the housing market plummeted, we lost thousands of clients, and our revenue dropped instantly. For the first time in the history of my company, we weren’t growing; in fact, we were contracting — fast.

    By 2009, our situation was looking dire. I didn’t want to lay anyone off, so my advisors suggested cutting back on our marketing budget and mailing fewer postcards every week. So, I listened and ended up regretting it big time.

    Our revenue shrunk 15% — a seven-digit loss — and we had fewer leads coming in, making it harder to bounce back. So, I took a big pay cut and fixed my mistake by increasing our marketing spend back to pre-crash totals. I also funneled more of my marketing budget into other industries (aside from real estate) that were buying from us.

    Thankfully, after I corrected our marketing, our numbers recovered quickly, and 2010 became a new highest-ever year in our revenue.

    When the pandemic hit in 2020, I wasn’t going to make the same mistake. I was dead set against cutting my marketing spend.

    At first, our average weekly revenue fell 41% from mid-March to the end of May. We used our reserves to keep operations and payroll going. But since we held strong, July 2020 became a new highest-ever revenue month for us. Once again, the decision to keep marketing paid off.

    Since 2020, my company’s revenue has grown an average of 17.5% annually. Previously, between 2009 and 2019, our annual revenue growth averaged only 4.6% — a huge difference!

    I share this with everyone because continuing my marketing was one of the biggest lessons I learned as a business owner. But you don’t have to go on my word alone — there is also extensive research to back up my experience.

    A McGraw-Hill research study analyzed 600 companies from 1980 to 1985 and concluded that businesses that chose to maintain or raise their level of advertising during a recession had significantly higher sales after the economy recovered. Not only did the companies that marketed during recessions perform better in the long run, but they also had 256% higher sales post-recession than the companies that didn’t maintain their marketing.

    I know firsthand that spending money when you are barely surviving an economic crisis is challenging, but consider how much harder you’ll have to work to recover your losses because you stopped investing in communicating with potential customers.

    The better option is to find smart ways to continue marketing your products and services rather than stop marketing completely.

    Related: Why You Shouldn’t Drop Your Marketing Budget in a Recession

    2. Find ways to reduce expenses and maximize efficiency

    You’ll have to get clever to weather an economic storm and come out strong. Review all areas of your business, and find ways to cut expenses, maximize efficiency and keep marketing consistently.

    The key is to achieve the right balance in cutting costs, making smart investments and marketing to gain market share and increase profit margins. The Harvard Business Review did a study on effective business strategies during three different global recessions and grouped all 4,700 businesses they studied into four distinct categories: prevention-focused companies, promotion-focused companies, pragmatic companies and progressive companies.

    Prevention-focused companies prioritize making defensive moves and are more concerned with avoiding losses and minimizing risks. Examples would be conducting mass layoffs, cutting expenses and reducing marketing and expansion. Promotion-focused companies do the complete opposite and spend a lot more on advertising and expansion to try to beat their competition. The pragmatic and progressive companies, on the other hand, do a combination of both offense and defense.

    Researchers discovered that the progressive companies found a sweet spot and made some reductions in spending but continued their marketing. As a result, they had a 32% higher chance of outperforming their competition by 10% or more following a recession. Progressive companies also surpassed pragmatic companies by 4% in sales and more than 3% in earnings and did twice as well as the entire group.

    You’ll have to take some time to analyze your business to find areas of change, but here are some to get you started:

    • Remove unnecessary expenses

    • Renegotiate repayment terms or prices with vendors

    • Consider going remote to save on office expenses

    • Examine your product or service to see if you can offer a lower-priced entry point

    • Save energy by reducing usage or changing work environments

    • Reduce business travel

    • Automate certain operations to save staff time on specific tasks

    I mentioned that during the pandemic, I refused to stop marketing because I had learned my lesson years before. But the other hill I was ready to die on was not doing any layoffs, which is a common first move many companies make to save money.

    I’m not saying “don’t ever do any layoffs,” because only you can determine what makes sense for your business. What I am saying is that you can look into other avenues to save money first before you eliminate team members already trained and experienced in your industry.

    Since I didn’t lay off any staff in 2020, we didn’t have to re-hire and train new talent once businesses re-opened. PostcardMania was ready to rock ‘n roll and bring in leads while other companies were busy trying to get staff back up to speed. Avoid that setback by trying your hardest to keep your employees first.

    Related: Worried About a Recession? Do This to Prepare Your Company.

    3. Assess your messaging and adjust if needed

    My final recommendation on how to market effectively when the market is down is to take more time crafting the right messaging to your audience. During a crisis, many families are forced to go into survival mode because the cost of basic necessities like eggs and milk has gone up, and they have to cut back in other areas to compensate. The worst thing you can do is say something alienating to them, so keep your messaging relevant to their needs.

    For example, LG Electronics’ slogan is “Life’s Good,” but they didn’t use it in their marketing during the 2008 recession because they did not want to seem out of touch with members of their audience who could be struggling.

    Most people spend less during an economic downturn, but they will spend whether it’s out of necessity or desire to escape from the stressful conditions. It may mean your customers will act choosier in their purchases and will also need the right motivation to make a move.

    For example, a gym membership may seem like a luxury when times are tough, but reframing your message to say that exercise helps families cope with stress and maintain health and happiness will sit with them more comfortably.

    With that in mind, not everyone is broke when the economy is crashing. There will still be people who can afford your products or services, so don’t forget about their needs either. The key is to know your audience well and speak to them as if you were walking in their shoes. The more relatable you can be in your marketing, the more they will trust you and remain faithful customers, whether their wallets are skinny or fat.

    Applying these three principles has sustained my business through the most difficult setbacks over two decades. With that said, the best way to learn is to do — and over the years, I’ve tried many different approaches to business and received different results. Don’t be afraid to try different strategies during an economic crisis. The experience you gain is priceless.

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    Joy Gendusa

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  • Kroger workers who quit are getting texts and emails from the company asking them to come back

    Kroger workers who quit are getting texts and emails from the company asking them to come back

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    Former Kroger employees who left the company have been getting some surprising texts and emails. The supermarket operator—the nation’s largest by sales—wants them back, and it isn’t being shy about reaching out and letting them know.

    That is not generally the way things work, of course. Once you leave a company, chances are slim it will reach out later asking you to return. You might have left your boss in a lurch, for one thing. But the lowest unemployment rate in 53 years means companies are getting creative about filling open positions. 

    “Alumni are also a talent source,” Tim Massa, chief people officer at the grocer, told the Wall Street Journal. According to him, the Cincinnati-based company has tried hard since the pandemic ended to stay in touch with ex-employees and has seen a significant number of them return. 

    For instance, the company persuaded Tish Spurlock, a former recruiter at Kroger, to come back after reaching out to her, the Journal reported. Spurlock had left for a technology firm but returned to Kroger in a new role with a higher salary. 

    Associated Wholesale Grocers meanwhile has reached out to ex-employees through LinkedIn and Facebook, according to the Journal. The company got more aggressive with rehiring after seeing how well it worked—returning workers generally hit their targets months before new ones do. 

    Of course, fears of a looming recession remain, credit card debt in the U.S. is rising while savings dwindle amid high inflation, and headlines about mass layoffs at big-name companies have been inescapable in recent months. But those layoffs have often been concentrated in the tech industry, where many companies overhired to meet surging demand during the pandemic.

    Last month, Amazon began firing 18,000 people, Microsoft let go of 10,000, and Google parent Alphabet slashed 12,000 jobs. That followed Facebook owner Meta cutting 11,000 workers in November. Meta is widely expected to cut more jobs in the near future as part of its “year of efficiency.” Last year more than 150,000 tech workers were laid off, according to tracking website Layoffs.fyi. But many other tech companies are still hiring, and laid-off tech workers have generally not stayed unemployed for long. 

    Across the U.S. economy, many workers who left their jobs during the Great Resignation ended up with higher salaries at new jobs. Understaffed employers, meanwhile, have felt compelled to boost salaries or offer higher ones to lure in new talent.

    Or in the case of Kroger and others, reach out to workers who quit.

    Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.

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    Steve Mollman

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  • Bank of America CEO doesn’t see many signs of a 2023 recession. Here’s why

    Bank of America CEO doesn’t see many signs of a 2023 recession. Here’s why

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    Bank of America CEO Brian Moynihan said Tuesday that the economy hasn’t showed many signs of faltering in 2023, despite recession predictions.

    Bank of America CEO Brian Moynihan said Tuesday that the economy hasn’t showed many signs of faltering in 2023, despite recession predictions.


    Diedra Laird

    dlaird@charlotteobserver.com

    The recession that economists and investors feared in 2022 hasn’t happened yet, Bank of America CEO Brian Moynihan said Tuesday.

    During livestreamed remarks at the Bank of America Securities Financial Services Conference in New York City, the chief executive of the Charlotte-based bank said that so far, he isn’t seeing any signs of a downturn.

    Consumers are still spending, wealthy bank clients are still investing their cash and businesses have yet to see profits drop off, Moynihan said.

    “They’re trying to be careful,” he said of the bank’s commercial customers. “But most of them, honestly, when you ask them are saying ‘I thought I’d be in worse condition right now. I thought I’d be facing more pressures, and things are still fine.’”

    Moynihan’s comments echoed previous public remarks. He’s emphasized that, despite macroeconomic concerns about inflation and rising interest rates, consumers are still pumping money through the economy.

    “Consumers have money, they’re employed, they’re spending and they have a lot of capacity to borrow,” he said. “That is what makes whatever we’re going through different.”

    Last spring, economists warned of an oncoming recession as prices rose and the Federal Reserve increased rates in response.

    But so far, the economy has avoided the crash landing that many feared: unemployment is at historic lows, and Americans aren’t holding on to their cash like they usually do in times of economic uncertainty.

    This month, the U.S. unemployment rate fell to 3.4%, its lowest in more than half a century. And on Tuesday morning, the Labor Department reported that the pace of inflation continued its decline, falling to 6.4%.

    Moynihan noted that, though the economy seems healthy now, a downturn could still be ahead, and firms are wise to prepare for that outcome.

    “They’re sitting and saying ‘I know it’s gotta come. The Fed can’t tighten this aggressively and not cause (a slowdown),” he said. “I understand that.”

    How Bank of America avoids job cuts

    Moynihan also touched on the bank’s headcount.

    During the 13 years that he’s led the bank, Bank of America’s total number of employees has varied greatly, ebbing and flowing between 200,000 and 300,000 workers.

    The bank currently employs about 218,000 workers, Moynihan said.

    Though other major banks, such as Goldman Sachs and Morgan Stanley, have announced major layoffs as the banking sector slowed last year, Moynihan has previously said that he’ll avoid deep job cuts.

    Instead, he said, Bank of America will let headcount shrink naturally through leaving some roles unfilled when workers voluntarily leave the bank.

    Bank of America was still hiring through the end of last year, adding 3,000 employees in the fourth quarter, Moynihan said.

    The bank’s employment in Charlotte has grown as well.

    In 2021, Bank of America had about 16,000 employees in the region. That number has increased to 18,000, the bank confirmed to The Charlotte Observer this month.

    This story was originally published February 14, 2023, 1:39 PM.

    Related stories from Charlotte Observer

    Hannah Lang covers banking, finance and economic equity for The Charlotte Observer. Her work has appeared in The Wall Street Journal, the Triangle Business Journal and the Greensboro News & Record. She studied business journalism at the University of North Carolina at Chapel Hill and grew up in the same town as her alma mater.

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  • 5 trends shaping banking and payments in 2023 | Bank Automation News

    5 trends shaping banking and payments in 2023 | Bank Automation News

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    With 2022 in the rearview mirror, let’s look at the trends that will shape the banking and payments space in 2023. The current elephant in the room is the looming recession, and it is essential that financial institutions manage risks and prioritize budgets while maintaining a clear route toward long-term growth.

    Tech investment will retrench to core capabilities

    Bhavin Turakhia, co-founder and CEO, Zeta

    Budgets are tightening, so financial institutions need to prioritize technology budgets as well as positive customer experiences. Initiatives that don’t improve customer experience or long-term capabilities are likely to be cut.

    Automation technologies are one way to improve the overall customer experience, decreasing response times and increasing value. Utilizing automation technology means predicting customer needs while providing them with visibility into their money. This further empowers a customer with more control, while simultaneously creating more meaningful interactions. Being a competitive force, despite tightening budgets, requires modernizing platforms to enable faster change and improving core processes through automation.

    What will the recession mean for lending and deposits?

    The current economic landscape creates a drastic impact on the way consumers will manage their finances in the upcoming months. While some will opt to place their funds in savings for a safety net, others will not have this choice and will turn to BNPL and credit cards as a solution. In fact, credit card delinquencies ticked up from 1.85% in Q1 2021 to 2.08% in Q3 2022. As lending and deposit rates increase, it is important that financial institutions provide adequate resources to prevent their customers and members from falling into delinquency.

    Innovating in a regulated environment

    Although the Durbin 2.0 amendment is currently up in the air, it does draw attention to the uncertainty that regulatory changes can bring for financial institutions, which often are fighting the innovation battle with one arm tied behind their back compared to non-banks — though some leveling of the playing field is underway at the CFPB. Despite the current disadvantage, financial institutions have the opportunity to react more quickly to the current regulatory landscape. With proper technology, financial institutions can focus less of their resources on compliance and more on innovation.

    Managing risk while capturing Gen Z growth

    It is clear that Generation Z is becoming a sizable market. With the young generation growing, it provides financial institutions with a great opportunity to appeal to this audience. Gen Z has grown up surrounded by much more technology than past generations, proving to be truly digitally native. With technology streamlining much of their lives, it is no surprise that they would also expect secure, efficient banking services that appeal to their individualized needs.

    This generation is at a pivotal point in their financial journey where habits and preferences will be formed. If a financial institution waits to appeal to this generation, they will ultimately fall behind their competition.

    Evolving competition with non-banks

    It’s no secret that emerging fintechs often compete with smaller financial institutions, decreasing bank growth and profits. Many people drift toward faster, more innovative solutions that their current financial institutions cannot provide them with, and recessions can often reveal who has a more viable business model. In the new year, resilient fintechs will grow stronger, while fintechs and banks who are not evolving might go out of business.

    As we enter this year, we can learn and grow from the trends and innovation of 2022. Customer experience is key, and technology can be utilized as a resource to further enhance these experiences while also prioritizing long-term success. It is necessary to maintain positive customer interactions while also identifying growth opportunities among future generations. Overall, automated, modernized solutions will limit risks without sacrificing growth as we enter another year filled with advancing technology and innovative solutions.

    Bhavin Turakhia is co-founder and CEO of Zeta, a banking tech unicorn and prover of next-gen credit card processing.

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    Bhavin Turakhia

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  • Why You Shouldn’t Drop Your Marketing Budget in a Recession

    Why You Shouldn’t Drop Your Marketing Budget in a Recession

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    Opinions expressed by Entrepreneur contributors are their own.

    When the economy takes a downturn, and the word “recession” is uttered in executive offices across the country, there is often one standard response: cut the budget. For many companies, the first department on the chopping block is marketing. This is the one area of businesses where results may seem intangible, and executives could assume — at their peril — that slicing away some of the perceived marketing fat will make little difference to the end result. The truth could not be more different.

    You can switch it off — but you shouldn’t

    Advancements in marketing tools have made marketing budgets even more at risk in times of recession. Before digital marketing was the norm, businesses were often tied into lengthy and expensive-to-kill print and radio campaigns. With digital marketing, though, switching off the campaign is as easy as one click.

    The flexibility and cost-efficiency of digital marketing are some of its greatest benefits, after all. You could go from spending $100,000 a month to zero in the blink of an eye. For a small or medium-sized business, that could be game-changing. It could also be game-ending in the medium to long term.

    Switching off your digital marketing efforts in a recession would be completely counterintuitive because it is during this very time period that more people will be spending time online than ever before. Sure, they may not be spending money on nonessentials the same way they were, but nothing lasts forever. Not even a recession. By completely removing yourself from the digital market, you nearly guarantee that, when your customer is ready to spend again, they won’t have your brand in mind.

    Related: 6 Proven Business Marketing Strategies to Grow During a Recession

    Market smart, not hard

    The aspects of digital marketing we enjoy so much (its flexibility and cost-effectiveness) make it the one budget you should not cut during a recession. Instead, consider narrowing your targeting strategy and confirming that you are using that budget to its best effect. It will pay you back in dividends when the economic noose starts to loosen.

    Even if you aren’t making your presence known online, your competitors are. And that means that they’ll be at the forefront of your target audience’s minds when the time comes to buy.

    For ecommerce businesses, emphasizing digital marketing during a recession should really not be a question. More than ever, consumers are shifting to online shopping, and even if they aren’t splurging on luxury items, they’re still buying essentials and even treating themselves. Ecommerce businesses cannot afford to not have a consistent digital presence.

    Another important reason to maintain your digital marketing efforts during a pandemic is the long-term value of brand awareness. When money is scarce, consumers are careful how they spend their dollars and who they spend them with. Customers will want to be sure they are buying from reputable and well-known brands, and for many consumers today, reputation and brand awareness are built in the digital realm.

    Speaking from experience

    I started my own business in 2008 — a year which, for many, brings back difficult memories of extreme financial hardship. And yet, my company thrived. I invested in marketing — and my customers responded because they knew the recession would not last forever and they couldn’t put their lives or businesses on hold.

    Digital marketing is the one channel that provides easy-to-validate results. Keep in mind, the value of the data you get from your marketing efforts is equivalent to the level of attribution tracking you have in place. Having that clear visibility allows you to channel your efforts in the right direction, which is even more critical during times of economic stress.

    Related: How to Recession-Proof Your Ads and Meet Customers Where They Are

    Best practices for marketing in a recession

    To ensure you’re getting the most out of your marketing dollars in trying financial times, there are a few guidelines you can follow:

    • Focus on holistic attribution: It’s vital to ensure that you really know which digital channels are working together to bring in sales and brand awareness. Otherwise, you may end up pulling the wrong levers and wasting precious money.

    • Personalize to maximize conversions: A recession is not the time to cast wide nets out in the hopes that you’ll catch the right fish. You’ll need to ensure you are narrowly targeting just the right group of people, and continuously checking in with your attribution data to fine-tune the specifics of your campaigns.

    • Encourage repeat business through brand loyalty: Attracting new customers is important, but keeping the ones you already have is equally so. Focus on providing amazing customer experiences to build brand loyalty during the toughest of times, and you’ll see repeat business as a reward when the sun comes out from behind the clouds.

    It is entirely possible to market your way through a recession, and marketing budgets should definitely not suffer during trying economic times. Market strategically, track attribution holistically, and make the most of the changes that come with global financial challenges. The recession will come to an end, but your business doesn’t need to end with it.

    Related: Why You Should Never Skimp on Brand Marketing in a Recession

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    Sergio Alvarez

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  • Look for stocks to lose 30% from here, says strategist David Rosenberg. And don’t even think about turning bullish until 2024.

    Look for stocks to lose 30% from here, says strategist David Rosenberg. And don’t even think about turning bullish until 2024.

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    David Rosenberg, the former chief North American economist at Merrill Lynch, has been saying for almost a year that the Fed means business and investors should take the U.S. central bank’s effort to fight inflation both seriously and literally.

    Rosenberg, now president of Toronto-based Rosenberg Research & Associates Inc., expects investors will face more pain in financial markets in the months to come.

    “The recession’s just starting,” Rosenberg said in an interview with MarketWatch. “The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle.” Investors can expect to endure more uncertainty leading up to the time — and it will come — when the Fed first pauses its current run of interest rate hikes and then begins to cut.

    Fortunately for investors, the Fed’s pause and perhaps even cuts will come in 2023, Rosenberg predicts. Unfortunately, he added, the S&P 500
    SPX,
    -0.61%
    could drop 30% from its current level before that happens. Said Rosenberg: “You’re left with the S&P 500 bottoming out somewhere close to 2,900.”

    At that point, Rosenberg added, stocks will look attractive again. But that’s a story for 2024.

    In this recent interview, which has been edited for length and clarity, Rosenberg offered a playbook for investors to follow this year and to prepare for a more bullish 2024. Meanwhile, he said, as they wait for the much-anticipated Fed pivot, investors should make their own pivot to defensive sectors of the financial markets — including bonds, gold and dividend-paying stocks.

    MarketWatch: So many people out there are expecting a recession. But stocks have performed well to start the year. Are investors and Wall Street out of touch?

    Rosenberg: Investor sentiment is out of line; the household sector is still enormously overweight equities. There is a disconnect between how investors feel about the outlook and how they’re actually positioned. They feel bearish but they’re still positioned bullishly, and that is a classic case of cognitive dissonance. We also have a situation where there is a lot of talk about recession and about how this is the most widely expected recession of all time, and yet the analyst community is still expecting corporate earnings growth to be positive in 2023.

    In a plain-vanilla recession, earnings go down 20%. We’ve never had a recession where earnings were up at all. The consensus is that we are going to see corporate earnings expand in 2023. So there’s another glaring anomaly. We are being told this is a widely expected recession, and yet it’s not reflected in earnings estimates – at least not yet.

    There’s nothing right now in my collection of metrics telling me that we’re anywhere close to a bottom. 2022 was the year where the Fed tightened policy aggressively and that showed up in the marketplace in a compression in the price-earnings multiple from roughly 22 to around 17. The story in 2022 was about what the rate hikes did to the market multiple; 2023 will be about what those rate hikes do to corporate earnings.

    “ You’re left with the S&P 500 bottoming out somewhere close to 2,900. ”

    When you’re attempting to be reasonable and come up with a sensible multiple for this market, given where the risk-free interest rate is now, and we can generously assume a roughly 15 price-earnings multiple. Then you slap that on a recession earning environment, and you’re left with the S&P 500 bottoming out somewhere close to 2900.

    The closer we get to that, the more I will be recommending allocations to the stock market. If I was saying 3200 before, there is a reasonable outcome that can lead you to something below 3000. At 3200 to tell you the truth I would plan on getting a little more positive.

    This is just pure mathematics. All the stock market is at any point is earnings multiplied by the multiple you want to apply to that earnings stream. That multiple is sensitive to interest rates. All we’ve seen is Act I — multiple compression. We haven’t yet seen the market multiple dip below the long-run mean, which is closer to 16. You’ve never had a bear market bottom with the multiple above the long-run average. That just doesn’t happen.

    David Rosenberg: ‘You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios.’


    Rosenberg Research

    MarketWatch: The market wants a “Powell put” to rescue stocks, but may have to settle for a “Powell pause.” When the Fed finally pauses its rate hikes, is that a signal to turn bullish?

    Rosenberg: The stock market bottoms 70% of the way into a recession and 70% of the way into the easing cycle. What’s more important is that the Fed will pause, and then will pivot. That is going to be a 2023 story.

    The Fed will shift its views as circumstances change. The S&P 500 low will be south of 3000 and then it’s a matter of time. The Fed will pause, the markets will have a knee-jerk positive reaction you can trade. Then the Fed will start to cut interest rates, and that usually takes place six months after the pause. Then there will be a lot of giddiness in the market for a short time. When the market bottoms, it’s the mirror image of when it peaks. The market peaks when it starts to see the recession coming. The next bull market will start once investors begin to see the recovery.

    But the recession’s just starting. The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle when the central bank has cut interest rates enough to push the yield curve back to a positive slope. That is many months away. We have to wait for the pause, the pivot, and for rate cuts to steepen the yield curve. That will be a late 2023, early 2024 story.

    MarketWatch: How concerned are you about corporate and household debt? Are there echoes of the 2008-09 Great Recession?

    Rosenberg: There’s not going to be a replay of 2008-09. It doesn’t mean there won’t be a major financial spasm. That always happens after a Fed tightening cycle. The excesses are exposed, and expunged. I look at it more as it could be a replay of what happened with nonbank financials in the 1980s, early 1990s, that engulfed the savings and loan industry. I am concerned about the banks in the sense that they have a tremendous amount of commercial real estate exposure on their balance sheets. I do think the banks will be compelled to bolster their loan-loss reserves, and that will come out of their earnings performance. That’s not the same as incurring capitalization problems, so I don’t see any major banks defaulting or being at risk of default.

    But I’m concerned about other pockets of the financial sector. The banks are actually less important to the overall credit market than they’ve been in the past. This is not a repeat of 2008-09 but we do have to focus on where the extreme leverage is centered.

    Read: The stock market is wishing and hoping the Fed will pivot — but the pain won’t end until investors panic

    It’s not necessarily in the banks this time; it is in other sources such as private equity, private debt, and they have yet to fully mark-to-market their assets. That’s an area of concern. The parts of the market that cater directly to the consumer, like credit cards, we’re already starting to see signs of stress in terms of the rise in 30-day late-payment rates. Early stage arrears are surfacing in credit cards, auto loans and even some elements of the mortgage market. The big risk to me is not so much the banks, but the nonbank financials that cater to credit cards, auto loans, and private equity and private debt.

    MarketWatch: Why should individuals care about trouble in private equity and private debt? That’s for the wealthy and the big institutions.

    Rosenberg: Unless private investment firms gate their assets, you’re going to end up getting a flood of redemptions and asset sales, and that affects all markets. Markets are intertwined. Redemptions and forced asset sales will affect market valuations in general. We’re seeing deflation in the equity market and now in a much more important market for individuals, which is residential real estate. One of the reasons why so many people have delayed their return to the labor market is they looked at their wealth, principally equities and real estate, and thought they could retire early based on this massive wealth creation that took place through 2020 and 2021.

    Now people are having to recalculate their ability to retire early and fund a comfortable retirement lifestyle. They will be forced back into the labor market. And the problem with a recession of course is that there are going to be fewer job openings, which means the unemployment rate is going to rise. The Fed is already telling us we’re going to 4.6%, which itself is a recession call; we’re going to blow through that number. All this plays out in the labor market not necessarily through job loss, but it’s going to force people to go back and look for a job. The unemployment rate goes up — that has a lag impact on nominal wages and that is going to be another factor that will curtail consumer spending, which is 70% of the economy.

    “ My strongest conviction is the 30-year Treasury bond. ”

    At some point, we’re going to have to have some sort of positive shock that will arrest the decline. The cycle is the cycle and what dominates the cycle are interest rates. At some point we get the recessionary pressures, inflation melts, the Fed will have successfully reset asset values to more normal levels, and we will be in a different monetary policy cycle by the second half of 2024 that will breathe life into the economy and we’ll be off to a recovery phase, which the market will start to discount later in 2023. Nothing here is permanent. It’s about interest rates, liquidity and the yield curve that has played out before.

    MarketWatch: Where do you advise investors to put their money now, and why?

    Rosenberg: My strongest conviction is the 30-year Treasury bond
    TMUBMUSD30Y,
    3.674%    .
    The Fed will cut rates and you’ll get the biggest decline in yields at the short end. But in terms of bond prices and the total return potential, it’s at the long end of the curve. Bond yields always go down in a recession. Inflation is going to fall more quickly than is generally anticipated. Recession and disinflation are powerful forces for the long end of the Treasury curve.

    As the Fed pauses and then pivots — and this Volcker-like tightening is not permanent — other central banks around the world are going to play catch up, and that is going to undercut the U.S. dollar
    DXY,
    +0.70%    .
    There are few better hedges against a U.S. dollar reversal than gold. On top of that, cryptocurrency has been exposed as being far too volatile to be part of any asset mix. It’s fun to trade, but crypto is not an investment. The crypto craze — fund flows directed to bitcoin
    BTCUSD,
    +0.35%
    and the like — drained the gold price by more than $200 an ounce.

    “ Buy companies that provide the goods and services that people need – not what they want. ”

    I’m bullish on gold
    GC00,
    +0.22%
    – physical gold — bullish on bonds, and within the stock market, under the proviso that we have a recession, you want to ensure you are invested in sectors with the lowest possible correlation to GDP growth.

    Invest in 2023 the same way you’re going to be living life — in a period of frugality. Buy companies that provide the goods and services that people need – not what they want. Consumer staples, not consumer cyclicals. Utilities. Health care. I look at Apple as a cyclical consumer products company, but Microsoft is a defensive growth technology company.

    You want to be buying essentials, staples, things you need. When I look at Microsoft
    MSFT,
    -0.61%    ,
    Alphabet
    GOOGL,
    -1.79%    ,
    Amazon
    AMZN,
    -1.17%    ,
    they are what I would consider to be defensive growth stocks and at some point this year, they will deserve to be garnering a very strong look for the next cycle.

    You also want to invest in areas with a secular growth tailwind. For example, military budgets are rising in every part of the world and that plays right into defense/aerospace stocks. Food security, whether it’s food producers, anything related to agriculture, is an area you ought to be invested in.

    You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios. If you follow that you’ll do just fine. I just think you’ll do far better if you have a healthy allocation to long-term bonds and gold. Gold finished 2022 unchanged, in a year when flat was the new up.

    In terms of the relative weighting, that’s a personal choice but I would say to focus on defensive sectors with zero or low correlation to GDP, a laddered bond portfolio if you want to play it safe, or just the long bond, and physical gold. Also, the Dogs of the Dow fits the screening for strong balance sheets, strong dividend payout ratios and a nice starting yield. The Dogs outperformed in 2022, and 2023 will be much the same. That’s the strategy for 2023.

    More: ‘It’s payback time.’ U.S. stocks have been a no-brainer moneymaker for years — but those days are over.

    Plus: ‘The Nasdaq is our favorite short.’ This market strategist sees recession and a credit crunch slamming stocks in 2023.

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  • IMF Managing Director Kristalina Georgieva: The 60 Minutes Interview

    IMF Managing Director Kristalina Georgieva: The 60 Minutes Interview

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    IMF Managing Director Kristalina Georgieva: The 60 Minutes Interview – CBS News


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    IMF’s Georgieva: the U.S. economy will likely slow down this year, but narrowly avoid a recession.

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  • U.S. job growth surges unexpectedly

    U.S. job growth surges unexpectedly

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    U.S. job growth surges unexpectedly – CBS News


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    More than half a million jobs were created in January, nearly triple the expectations. Jobs in hospitality and leisure saw the biggest bump in last month’s jobs report. But inflation is still stubbornly high. Carter Evans takes a look.

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  • No Policy Pivot In Sight: “Higher For Longer” Rates On The Horizon

    No Policy Pivot In Sight: “Higher For Longer” Rates On The Horizon

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    The below is an excerpt from a recent edition of Bitcoin Magazine PRO, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

    The next FOMC meeting is on February 1, where the Federal Reserve will determine their next policy decision regarding interest rates. This article covers how the market expects the Fed to respond, what readers should watch for regarding changes in the expected path and the potential second-order effects of said changes.

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    Dylan LeClair

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  • U.S. employment costs slow again, but they’re still rising too fast to comfort Fed as inflation battle rages

    U.S. employment costs slow again, but they’re still rising too fast to comfort Fed as inflation battle rages

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    The numbers: The employment cost index slowed at the end of 2022 for the third quarter in a row, but worker compensation still rose a sharp 1% and didn’t offer much comfort to the Federal Reserve as it fights to tame inflation.

    Economists polled by The Wall Street Journal had forecast a 1.1% increase in the ECI in the fourth quarter.

    Although trending in the right direction, labor costs are still rising far faster than the Fed would like.

    Compensation climbed at a 5.1% clip in the 12 months ended in December — up from 5% in the prior quarter — to leave the increase in worker pay near the highest level in 40 years.

    By contrast, wages and benefits rose an average of 2.7% a year from 2017 to 2019.

    Read: Workers love big raises. The Fed, not so much. Why pay has a big role in the inflation fight.

    Key details: Wages advanced 1% in the fourth quarter, but in a good sign, they slowed from 1.3% in the prior period.

    The increase in wages in the 12 months ended in December was flat at 5.1%, however.

    Benefits rose at a 0.8% pace in the last three months of 2022. The 12-month increase in benefits was unchanged at 4.9%.

    The ECI reflects how much companies, governments and nonprofit institutions pay employees in wages and benefits.  Wages make up about 70% of employment costs and benefits the rest.

    The big picture: Senior Fed officials want to see a tight labor market loosen up and wage growth decelerate further to help ensure inflation returns to pre-pandemic levels of 2% or so.

    The central bank on Wednesday is expected to raise a key interest again. It’s likely to keep raising rates — or keep them high for longer — until it sees more signs in the ECI or other wage trackers that labor costs are coming down.

    The increase in consumer prices slowed to 6.5% at the end of 2022 from a 40-year high of 9.1% last summer, but it’s still more than triple the Fed’s inflation goal.

    Looking ahead: “This result is a decent outcome for the Fed, as labor costs appear to be decelerating, but it would be premature to declare victory,” said chief economist Stephen Stanley of Amherst Pierpont Securities. “With the unemployment rate at a 50-year-plus low of 3.5%, it would be exceedingly optimistic to conclude that wage pressures have rolled over.”

    “Wage growth is slowing gradually,” said senior U.S. economist Andrew Hunter of Capital Economics said in a note to clients. “The Fed is still likely to keep raising interest rates at the next couple of meetings, but we expect a further slowdown in wage growth over the coming months to convince officials to pause the tightening cycle after the March meeting.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.77%
    and S&P 500
    SPX,
    -1.30%
    were set to open higher in Tuesday trades. Stocks fell on Monday.

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  • Why Software Talent Is Still in Demand Despite Tech Layoffs, Downturn and a Potential Recession

    Why Software Talent Is Still in Demand Despite Tech Layoffs, Downturn and a Potential Recession

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    Opinions expressed by Entrepreneur contributors are their own.

    Talk of an economic downturn and potential recession was everywhere this year. These fears have strongly affected the tech industry, leading many companies to lay off thousands of employees in 2022.

    More than 1,000 tech companies fired over 150,000 employees in 2022. Meta, which owns Instagram and Facebook, let go of more than 11,000 employees. Amazon laid off over 10,000. There is also Twitter, where the new owner, Elon Musk, fired about half of the workforce.

    Many of the employees fired were software developers. Software engineers are integral to the tech industry, and it has left many wondering whether their skills and knowledge are losing value.

    Even cryptocurrency companies were firing workers. Coinbase CEO Brian Amstrong said the company would let go of 18% percent of its workforce. He stated, “We appear to be entering a recession after a 10+ year economic boom. While it is hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.” He cited the changing economic conditions as the primary reason for the layoffs. Many CEOs have done the same with similar reasoning.

    However, despite the layoffs and fears of an economic recession, top tech talent is still in demand. Software developers will always be integral to the tech sector, especially top-tier professionals at the top of their game. They are the foundation of the industry, and the best developers will have many opportunities before them after the layoffs.

    Related: Why The Demand for Tech Jobs Will Only Get Stronger

    High demand for software engineers

    Many saw the layoffs in the tech industry as a sign that their jobs and skills were less valuable than they thought. Companies will do what they must to stay afloat. They still value tech skills like software development.

    Tech talent is still valuable in many other industries, including agriculture, manufacturing and retail. Because of the power of big tech, many business sectors have needed more tech talent. Thanks to the job cuts, they can now hire the best.

    Software development is one of the most crucial fields in the tech industry. All forms of digitization require software programs that developers must make. Developers solve many solutions and produce real-world applications for everyday use.

    Software developers are still valuable, especially those from big tech companies. Software engineers from companies like Twitter, Netflix and Microsoft are getting jobs within hours or days of getting fired. Smaller companies are getting excellent tech talent at an absolute steal.

    Many software engineers are immediately finding similar jobs or roles in companies. The skills translate to many industries so they can fit in many firms. The other developers will also find other jobs in the tech sector and other industries. However, they will find themselves playing different roles to those they had before the layoffs.

    Software engineers may earn less than they did working at the tech giants. Taking a salary cut to work for a smaller company does not mean your skills are less valuable. It depends on what the company can afford and how you can help them grow.

    Moreover, software engineers can ask for assurances because of their talent, experience and value. Due to the layoffs, tech employees must ask what will happen if the firm decides to lay off a sizable portion of the workforce. They can also get stock options, so they are part company owners.

    Industries like banking have been hiring tech talent in the face of the tech industry layoffs. They can see developers’ value and are doing plenty to attract them. These industries know there has never been a better time to get the best tech talent.

    Related: Software Development Jobs Are a Bright Spot in Uncertain Economic Times. Here’s What Business Leaders Need to Know.

    Demand for software

    We live in a world run by software programs. With increasing digitization, there will always be a demand for software solutions. In particular, software developers are in high demand within the tech industry.

    In the age of data, firms need software developers who will analyze the data to create software solutions. They will also use the data to understand user needs, monitor performance and modify the programs accordingly.

    Software developers have skills that prove them valuable in many industries. As long as an industry needs software solutions, a developer can provide and customize them to the firms that need them.

    Fields in which a developer can work include data science, AI and machine learning, application development and cloud services. There is also the opportunity to be an entrepreneur and create something unique that offers customers value.

    With a skill set that has such a wide application, it is easy to see why software developers will still be in demand after the massive significant tech layoffs. The best developers will quickly land on their feet. They may even gain better positions than they had at their former workplaces.

    Related: The Future of Software Development in 2022 and Beyond

    Tech talent is still valuable

    Many tech workers suffered a terrible blow in 2022. Their prestigious jobs at giant tech firms vanished, leaving many stranded and confused. However, there is still a significant demand for tech professionals in our technological world, particularly software developers.

    Software development is the bedrock of the tech industry. Software engineers with valuable skill sets, experience and drive will quickly find other positions and opportunities. Software developers can apply their skills across a broad spectrum and are precious to many businesses and industries.

    They should know they are still valuable today, even in a challenging job environment. The rate at which companies continue to acquire the best software development talent proves it.

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    Steve Taplin

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  • 3 Recession-Proof Strategies for Small Business Owners

    3 Recession-Proof Strategies for Small Business Owners

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    Opinions expressed by Entrepreneur contributors are their own.

    Unless you’ve been hiding under a rock, you’ve probably read the dreary forecasts from JPMorgan, Citi and Goldman Sachs, which all agree that 2023 will be a rough year for the economy, perhaps even kicking off a “mild recession.”

    But try as they might with their recession talk on the heels of a global pandemic, supply chain chaos and market upheaval, we resilient entrepreneurs aren’t ready to throw in the towel quite yet.

    Small business owners’ most significant advantage is our ability to stay nimble and pivot toward opportunity. I say this as someone who built and exited a company after the last recession — when many founders rode a wave of “creative destruction” where smaller competitors thrived as big firms faltered. The little people, not the corporate behemoths, were best positioned to pick up the pieces and innovate.

    To see how others feel about this moment, Hello Alice surveyed 2,635 small business owners to gauge their sentiment heading into the new year. The findings, published in partnership with Mastercard, show that while nearly two-thirds of entrepreneurs are worried about a potential recession, an astounding 73% predict their businesses will grow this year.

    If that sounds counterintuitive, I agree. But a closer look at the results illustrates how scrappy entrepreneurs can be in the face of adversity. Rather than wait and see what happens, owners are already crafting action plans and seeking solutions to prepare them for the challenges ahead.

    Based on our survey results, here are three strategies for small business owners hoping to beat the 2023 trendlines.

    Related: 7 Recession-Proof Industries to Protect Your Money

    1) Make sure you have access to working capital now

    In uncertain times, small business owners need additional funding, particularly those mainly relying on bootstrapping.

    Why? Here are a few findings to set the scene:

    • 66% of owners said their expenses increased in 2022
    • 70% said their revenue stalled or decreased in 2022
    • 70% plan to apply for funding in 2023

    So far, entrepreneurs have successfully combatted inflation with price increases and adjustments to product offerings. Nearly two-thirds of owners said their business ended 2022 in a financial position as good or better than the year before. But the convergence of expenses and revenue tells a story of shrinking margins squeezed by inflated costs. You can’t raise prices forever, and events like a recession are certain to upend sales forecasts.

    Consider the following options to ensure you have ample working capital to overcome any financial surprises:

    • Develop a relationship with your bank. Lay the groundwork now, and you’ll have a friendly face to help you navigate available resources and facilitate potential financing applications.
    • Seek out a business credit card. Credit cards help you cover unexpected expenses and pursue new opportunities, often while earning valuable rewards that you can reinvest in your business.
    • Visit the Small Business Funding Center. This free resource matches you with relevant grants, loans, and credit opportunities.

    Related: How to Know If You Need Funding (and How to Get It)

    2) Get scrappy with tech solutions

    In our outlook survey, businesses ranked marketing among their top concerns. Owners are worried that price increases will reduce their overall customers, and the end of budget-friendly digital marketing makes customer acquisition more difficult (and expensive) than ever.

    Thankfully, a growing range of tech solutions can help owners optimize their marketing efforts while fitting into any budget. Here are a few ideas to get started:

    • Adopt software tools. Platforms like Constant Contact, Hubspot Marketing Hub and Sprout Social help you target your audience and amplify your reach.
    • Explore freelance help. Resources like Fiverr, Upwork, and MarketerHire can match you with affordable digital marketing support to take the work off your plate.
    • Look for discounts. Take advantage of introductory offers and seasonal discounts to test-drive tools before making a long-term commitment. Not sure where to look? The Hello Alice Business Solutions Center is one free resource that curates deals on popular software solutions to help owners shop and save.

    3) Be ready to fail fast and fail often

    Finally, in a reassuring sign that owners feel confident, a majority of small businesses plan to hire this year. According to our survey, twice as many business owners plan to hire in 2023 (52%) as were actively hiring in 2022 (26%). Growing headcounts are a proxy for growing businesses, but there’s still an inherent danger to making big changes, especially during uncertain times.

    Instead, operate with a startup mentality that sets up low-stakes experiments to explore an idea’s potential. Rather than dump your marketing budget into TikTok, test the waters with different types of content. Before bringing someone on full-time, trial them on a part-time or project basis. Set goals, measure outcomes, and assess where to go from there.

    Some of your 2023 experiments are sure to fail, but this innovative mindset helps you conserve valuable resources to invest in long-term growth in the years to come. And remember, the economy may flounder for a bit, but as entrepreneurs, times of uncertainty are when we thrive.

    Related: By Failing to Prepare, You Are Indeed Preparing to Fail

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    Carolyn Rodz

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  • Jobs report to give further clues about where economy is headed | CNN Business

    Jobs report to give further clues about where economy is headed | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    The Federal Reserve is going to raise interest rates again on Wednesday. But will it be another half-point hike or just a quarter-point increase? And what about the rest of the year?

    The Fed’s actions beyond this week’s meeting will depend primarily on whether inflation is truly slowing. Investors will get another clue when the January jobs report is released on Friday.

    Economists predict that 185,000 jobs were added last month, a slowdown from the gain of 223,000 jobs in December and 263,000 in November. A further deceleration in the labor market would likely please the Fed, as it would show that last year’s rate hikes are successfully taking some air out of the economy.

    The Fed knows it’s in a tough situation. Inflation pressures are partly fueled by wage gains for workers. In an environment where the unemployment rate is at a half-century low of 3.5%, employees have been able to command big increases in pay to keep up with rising prices of consumer goods and services.

    Along those lines, average hourly earnings, a measure of wages that is also part of the monthly jobs report, are expected to increase 4.3% year-over year. That’s down from 4.6% in December and 5.1% in November.

    As wage growth cools, so do price increases. The Fed’s favorite measure of inflation – the Personal Consumption Price Index or PCE – rose “just” 5% over the past 12 months through last December, compared to a 5.5% annual increase in November.

    That is still uncomfortably high, but the trend is moving in the right direction.

    The problem for the Fed, though, is that it may need to keep raising interest rates until there is further evidence that the labor market is cooling off enough to push the rate of inflation even lower.

    Several other job market indicators continue to show that the US economy is in no serious danger of a recession just yet. The number of people filing for weekly jobless claims dipped last week to 186,000, a nine-month low. Investors will get the latest weekly initial claims numbers on Thursday.

    The market will also be closely watching reports about private-sector job growth from payroll processor ADP and the Job Openings and Labor Turnover Survey (JOLTS) from the Department of Labor this week. The last JOLTS report showed that more jobs were available than expected in November.

    Still, some expect that wage growth should continue to fall, which should take pressure off the Fed somewhat.

    “Wage growth has been on a slowing trajectory, and we suspect that softer wage growth will be a trend in 2023 as jobs available contract,” said Tony Welch, chief investment officer at SignatureFD, a wealth management firm, in a report.

    Not everyone agrees with that assessment. Organized labor has been winning bigger pay increases lately in the transportation industry. And more workers at tech and retail giants have been unionizing as of late.

    “Workers will be loath to relinquish the bargaining power they perceive to have gained over the past year,” said Jason Vaillancourt, global macro strategist at Putnam, in a report.

    Vaillancourt also pointed out that many consumers are still flush with cash that they saved up during the early stages of the pandemic. That could mean that inflation isn’t going away anytime soon.

    And even though the pace of jobs gains may be slowing, it’s not as if economists are starting to predict monthly job losses like the US has had in previous recessions.

    “Combine a strong labor market with a still substantial reserve of excess savings, and you have all the components in place to keep the Fed up at night,” Vaillancourt said.

    So as long as hopes for an economic “soft landing” persist, the Fed will have to keep worrying that inflation is too high. That increases the chances the Fed could go too far with rate hikes and ultimately lead to a recession.

    Wall Street is clearly buying into the “soft landing” argument. Just look at how well tech stocks have done so far this year, despite a series of high-profile layoff announcements from top Silicon Valley companies in the past few months.

    The Nasdaq is up 11% so far in January, putting it on track for its best monthly performance since July.

    Some argue that more tech layoffs won’t be a problem. Investors seem to be (somewhat perversely) taking the view that companies cutting costs is a good thing for profits and that revenue likely won’t be impacted in a negative way because consumers are still spending.

    “A theme that can’t go unnoticed this month is how traders are rewarding firms for cutting jobs. With corporate layoffs making headlines each evening, you might think the consumer is strained. Maybe not so much. It turns out that demand is decent,” said Frank Newman, portfolio manager at Ally Invest, in a report.

    But a continuation of the Nasdaq’s surge may depend a lot on how well a quartet of tech leaders do when they report fourth quarter earnings next week: Facebook and Instagram owner Meta Platforms, Apple

    (AAPL)    , Google owner Alphabet

    (GOOGL)     and Amazon

    (AMZN)    .

    “A set of much weaker-than-expected reports from these firms could dent the market’s strong start to 2023,” said Daniel Berkowitz, senior investment officer for investment manager Prudent Management Associates, in a report.

    So far, tech earnings season is not off to an inspiring start, with Microsoft

    (MSFT)    , Intel

    (INTC)     and IBM

    (IBM)     all reporting weak results. But it’s important to note that that trio is part of the “old tech” guard while Apple, Amazon, Alphabet and Meta all have more rapidly growing businesses.

    Tesla

    (TSLA)     reported strong results last week, which could be a sign of good things to come from other more dynamic tech companies.

    Monday: IMF releases world outlook; earnings from Philips

    (PHG)    , GE Healthcare, Franklin Resources

    (BEN)    , SoFi, Ryanair

    (RYAAY)    , Whirlpool

    (WHR)     and Principal Financial

    (PFG)

    Tuesday: China official PMI; Europe GDP; US employment cost index; US consumer confidence; earnings from Exxon Mobil

    (XOM)    , Samsung

    (SSNLF)    , GM

    (GM)    , Phillips 66

    (PSX)    , Marathon Petroleum

    (MPC)    , UPS

    (UPS)    , Pfizer

    (PFE)    , Sysco

    (SYY)    , Caterpillar

    (CAT)    , UBS

    (UBS)    , McDonald’s

    (MCD)    , Spotify

    (SPOT)    , Mondelez

    (MDLZ)    , Amgen

    (AMGN)    , AMD

    (AMD)    , Electronic Arts

    (EA)    , Snap

    (SNAP)     and Match

    (MTCH)

    Wednesday: Fed meeting; US ADP private sector jobs; US JOLTS; China Caixin PMI; Europe inflation; earnings from AmerisourceBergen

    (ABC)    , Humana

    (HUM)    , T-Mobile

    (TMUS)    , Novartis

    (NVS)    , Altria

    (MO)    , Peloton

    (PTON)    , Meta Platforms, McKesson

    (MCK)    , MetLife

    (MET)     and AllState

    (ALL)

    Thursday: US weekly jobless claims; US productivity; BOE meeting; ECB meting; Germany trade data; earnings from Cardinal Health

    (CAH)    , ConocoPhillips

    (COP)    , Merck

    (MRK)    , Bristol-Myers

    (BMY)    , Honeywell

    (HON)    , Eli Lilly

    (LLY)    , Stanley Black & Decker

    (SWK)    , Hershey

    (HSY)    , Sirius XM

    (SIRI)    , Penn Entertainment

    (PENN)    , Ferrari

    (RACE)    , Harley-Davidso

    (HOG)    n, Apple, Amazon, Alphabet, Ford

    (F)    , Qualcomm

    (QCOM)    , Starbucks

    (SBUX)    , Gilead Sciences

    (GILD)    , Hartford Financial

    (HIG)    , Clorox

    (CLX)     and WWE

    (WWE)

    Friday: US jobs report; US ISM non-manufacturing (services) index; earnings from Cigna

    (CI)    , Sanofi

    (SNY)    , LyondellBasell

    (LYB)     and Regeneron

    (REGN)

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  • U.S. consumer sentiment strengthens in final January reading

    U.S. consumer sentiment strengthens in final January reading

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    The numbers: U.S. consumer sentiment improved in late January to 64.9, according to the University of Michigan’s gauge of consumer attitudes.

    This added 5.2 index points from 59.7 in December and was up from the initial January reading of 64.6.

    Economists surveyed by The Wall Street Journal had forecast an unchanged reading of 64.6.

    Key details: A  gauge of consumer’s views of current conditions rose to a final reading of 68.4 in January from 59.4 in the prior month.

    The indicator of expectations for the next six months rose to 62.7 from 59.9 in December.

    Americans viewed that inflation was moderating in January. They expected the inflation rate in the next year to average about 3.9%, down from 4.4% in December. This is the lowest level since April 2021.

    In the longer run, inflation expectations held steady at 2.9%.

    Big picture: Consumer confidence rose for the second straight month on lower energy prices and better financial market conditions. Assessments of personal finances are improving, supported by higher income and easing price pressures.

    But sentiment remains well below the pre-pandemic level of 101 hit in February 2020 and the more recent high of 88.3 hit in April 2021.

    Market reaction: Stocks
    DJIA,
    -0.20%

    SPX,
    -0.17%
    opened higher on Friday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.534%
    rose to 3.54%.

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  • Inflation rate slows again to 15-month low, PCE shows, as U.S. economy weakens

    Inflation rate slows again to 15-month low, PCE shows, as U.S. economy weakens

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    The numbers: The cost of U.S. goods and services rose a scant 0.1% in December in yet another sign inflation is cooling off, opening the door for the Federal Reserve to stop raising interest rates soon.

    The rate of inflation, using the Fed’s preferred PCE index, has tapered off rapidly since last summer. Falling oil prices have played a big role, but inflation more broadly is easing.

    The annual increase in prices slowed to 5% in December from 5.5% in the prior month and a 40-year high of 7% last summer, according to fresh government data.

    That’s the smallest increase in 15 months, though still well above pre-pandemic levels of less than 2% annual inflation.

    Key details: The more closely followed core index rose a modest 0.3% last month, matching Wall Street’s forecast.

    The increase in the core rate of inflation in the past 12 months decelerated to 4.4% from 4.7%. That’s also the lowest level in 14 months.

    The PCE index is viewed by the Fed as the best predictor of future inflation trends, especially the core gauge that strips out volatile food and energy costs.

    Unlike it’s better-known cousin, the consumer price index, the PCE gauge takes into account how consumers change their buying habits due to rising prices.

    They might substitute cheaper goods such as chicken thighs for more expensive ones like boneless breasts to keep costs down, or buy generic medicines instead of brand names.

    The CPI showed inflation rising at a 6.5% yearly rate in December, but it’s also slowed sharply since the summer.

    Big picture: The Fed is trying to restore inflation to pre-pandemic levels of 2% or so, and it will keep raising interest rates until it is convinced the genie is back in the bottle. Higher rates reduce inflation by slowing the economy.

    Yet with inflation subsiding, Wall Street is raising questions about whether the Fed’s work is almost done. If rates go too high, the economy could sink into recession.

    Indeed, many economists think a downturn is likely this year. The central bank has jacked up a key U.S. interest rate to a 15-year high of 4.5% from near zero less than a year ago — and the effects of higher borrowing costs are just starting to bite.

    Looking ahead: “With higher interest rates evidently weighing heavily on demand now, we expect core inflation to continue moderating,” said chief North American economist Paul Ashworth of Capital Economics in a note to clients. That “will eventually persuade the Fed to begin cutting interest rates late this year.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.08%
    and S&P 500
    SPX,
    +0.25%
    were set to open slightly lower in Friday trades.

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  • Consumers spending falls at the end of 2022 and that’s not good news for the U.S. economy

    Consumers spending falls at the end of 2022 and that’s not good news for the U.S. economy

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    The numbers: Consumer spending fell 0.2% at the end of 2022, indicating the U.S. economy entered the new year with fading growth prospects and rising odds of recession.

    Analysts polled by The Wall Street Journal had forecast a 0.1% decline.

    Incomes rose 0.2% last month, the government said Friday, a bit faster than the rate of inflation.

    Key details: Americans spent less on gasoline in December after prices at the pump fell again. They also bought fewer new cars and trucks.

    While they purchased fewer goods last month, consumers spent more for services. Yet most of the money went to housing, medical care and transportation — necessities that Americans would prefer to spend less on.

    The U.S. savings rate rate, meanwhile, rose to 3.4% from 2.9% in the prior month. Savings had fallen late last year to the second lowest level on record going back to 1959.

    Households have dipped into their savings to support their spending habits because of high inflation. The so-called PCE price index is up 5% in the past year. And the better known consumer price index has risen 6.5% in the same span.

    Although inflation is slowing, prices are still rising faster than worker pay.

    Big picture:  Consumer spending, the main engine of the economy, sputtered toward the end of the year. Outlays also declined in November.

    High inflation ate into Americans’ budgets and rising interest rates made it more expensive to buy a car, home or other big-ticket items.

    Spending is unlikely to accelerate rapidly anytime soon, leaving the economy with weaker growth propects in 2023.

    The saving grace is a still-strong labor market that’s kept most Americans working — and earning a paycheck.

    Looking ahead: “A number of indicators are flashing red lights that a recession may be upon us,” said chief economist Bill Adams of Comerica. But “more data is needed to suss out whether the economy has definitively reached a turning point.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.08%
    and S&P 500
    SPX,
    +0.25%
    were set to open lower in Friday trades.

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  • U.S. economy grew to end 2022, unemployment rate stays low

    U.S. economy grew to end 2022, unemployment rate stays low

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    U.S. economy grew to end 2022, unemployment rate stays low – CBS News


    Watch CBS News



    The economy is fighting back against inflationary pressures, but many economists say that won’t last, and the economy could slow down in 2023 as an intended consequence of the Federal Reserve’s efforts to rein in inflation by raising interest rates. Economist and Harvard University professor Jeffrey Frankel joined CBS News to discuss what the latest GDP data could mean for the economy moving forward.

    Be the first to know

    Get browser notifications for breaking news, live events, and exclusive reporting.


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  • How will we know if the US economy is in a recession? | Long Island Business News

    How will we know if the US economy is in a recession? | Long Island Business News

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    The second consecutive quarter of economic growth that the government reported Thursday underscored that the nation isn’t in a recession despite high inflation and the Federal Reserve’s fastest pace of interest rate hikes in four decades.

    Yet the U.S. economy is hardly in the clear. The solid growth in the October-December quarter will do little to alter the widespread view of economists that a recession is very likely sometime this year.

    For now, the economy expanded at a 2.9% annual rate in the fourth quarter, though some of the underlying figures weren’t as healthy. Consumer spending, for example, grew at a slower pace than in the previous quarter, and business investment was weak. Last quarter’s growth was fueled by factors that won’t likely last. These include companies’ restocking of inventories and a drop in imports, which meant that more spending went to U.S.-made goods.

    Increased borrowing rates and still-high inflation are expected to steadily weaken consumer and business spending. Businesses will likely pare expenses in response, which could lead to layoffs and higher unemployment. And a likely recession in the United Kingdom and slower growth in China will erode the revenue and profits of American corporations. Such trends are expected to cause a U.S. recession sometime in the coming months.

    Still, there are reasons to expect that a recession, if it does come, will prove to be a comparatively mild one. Many employers, having struggled to hire after huge layoffs during the pandemic, may decide to retain most of their workforces even in a shrinking economy.

    Six months of economic decline is a long-held informal definition of a recession. Yet nothing is simple in a post-pandemic economy in which growth was negative in the first half of last year but the job market remained robust, with ultra-low unemployment and healthy levels of hiring. The economy’s direction has confounded the Fed’s policymakers and many private economists ever since growth screeched to a halt in March 2020, when COVID-19 struck and 22 million Americans were suddenly thrown out of work.

    Inflation, the economy’s biggest threat last year, is now showing signs of steadily declining. Used and new cars are becoming less expensive. Price increases for furniture, clothes and other physical goods are slowing.

    Last year, the Fed raised its benchmark interest rate seven times, from zero to a range of 4.25% to 4.5%. The Fed’s policymakers have projected that they will keep raising their key rate until it tops 5%, which would be the highest level in 15 years. As borrowing costs swell, fewer Americans can afford a mortgage or an auto loan. Higher rates, combined with inflated prices, could deprive the economy of its main engine — healthy consumer spending.

    Fed officials have made clear that they’re willing to tip the economy into a recession if necessary to defeat high inflation, and most economists believe them. Many analysts envision a recession beginning as early as the April-June quarter this year.

    So what is the likelihood of a recession? Here are some questions and answers:

    ____

    WHY DO MANY ECONOMISTS FORESEE A RECESSION?

    They expect the Fed’s aggressive rate hikes and high inflation to overwhelm consumers and businesses, forcing them to slow their spending and investment. Businesses will likely also have to cut jobs, causing spending to fall further.

    Consumers have so far proved remarkably resilient in the face of higher rates and rising prices. Still, there are signs that their sturdiness is starting to crack.

    Retail sales have dropped for two months in a row. The Fed’s so-called beige book, a collection of anecdotal reports from businesses around the country, shows that retailers are increasingly seeing consumers resist higher prices.

    Credit card debt is also rising — evidence that Americans are having to borrow more to maintain their spending levels, a trend that probably isn’t sustainable.

    More than half the economists surveyed by the National Association for Business Economics say the likelihood of a recession this year is above 50%.

    ___

    WHAT ARE SOME SIGNS THAT A RECESSION MAY HAVE BEGUN?

    The clearest signal would be a steady rise in job losses and a surge in unemployment. Claudia Sahm, an economist and former Fed staff member, has noted that since World War II, an increase in the unemployment rate of a half-percentage point over several months has always signaled a recession has begun.

    Many economists monitor the number of people who seek unemployment benefits each week, a gauge that indicates whether layoffs are worsening. Weekly applications for jobless aid actually dropped last week to a historically low 190,000. Employers continue to add many jobs, causing the unemployment rate to fall in December to 3.5%, a half-century low, from 3.7%.

    ___

    ANY OTHER SIGNALS TO WATCH FOR?

    Economists monitor changes in the interest payments, or yields, on different bonds for a recession signal known as an “inverted yield curve.” This occurs when the yield on the 10-year Treasury falls below the yield on a short-term Treasury, such as the three-month T-bill. That is unusual. Normally, longer-term bonds pay investors a richer yield in exchange for tying up their money for a longer period.

    Inverted yield curves generally mean that investors foresee a recession that will compel the Fed to slash rates. Inverted curves often predate recessions. Still, it can take 18 to 24 months for a downturn to arrive after the yield curve inverts.

    Ever since July, the yield on the two-year Treasury note has exceeded the 10-year yield, suggesting that markets expect a recession soon. And the three-month yield has also risen far above the 10-year, an inversion that has an even better track record at predicting recessions.

    ___

    WHO DECIDES WHEN A RECESSION HAS STARTED?

    Recessions are officially declared by the obscure-sounding National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

    The committee considers trends in hiring. It also assesses many other data points, including gauges of income, employment, inflation-adjusted spending, retail sales and factory output. It puts heavy weight on a measure of inflation-adjusted income that excludes government support payments like Social Security.

    Yet the NBER typically doesn’t declare a recession until well after one has begun, sometimes for up to a year.

    ___

    DOES HIGH INFLATION TYPICALLY LEAD TO A RECESSION?

    Not always. Inflation reached 4.7% in 2006, at that point the highest in 15 years, without causing a downturn. (The 2008-2009 recession that followed was caused by the bursting of the housing bubble).

    But when it gets as high as it did last year — it reached a 40-year peak of 9.1% in June — a downturn becomes increasingly likely.

    That’s for two reasons: First, the Fed will sharply raise borrowing costs when inflation gets that high. Higher rates then drag down the economy as consumers are less able to afford homes, cars and other major purchases.

    High inflation also distorts the economy on its own. Consumer spending, adjusted for inflation, weakens. And businesses grow uncertain about the future economic outlook. Many of them pull back on their expansion plans and stop hiring. This can lead to higher unemployment as some people choose to leave jobs and aren’t replaced.

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  • U.S. stocks climb as GDP report shows economy taking Fed’s rate hikes in stride

    U.S. stocks climb as GDP report shows economy taking Fed’s rate hikes in stride

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    U.S. stocks opened higher on Thursday as optimism over Tesla’s earnings results and a stronger-than-expected GDP report left investors in a better mood following Wednesday’s intraday selloff.

    How are stocks trading
    • The S&P 500
      SPX,
      +0.40%
      rose by 34 points, or 0.8%, to 4,049.

    • Dow Jones Industrial Average
      DJIA,
      +0.05%
      gained 145 points, or 0.4%, to 33,889.

    • Nasdaq Composite
      COMP,
      +0.89%
      advanced 174 points, or 1.5%, to 11,487.

    The Dow Jones Industrial Average finished Wednesday’s session up 10 points after falling roughly 400 points at the lows earlier in the session. The S&P 500 finished little-changed after erasing its early losses, while the Nasdaq ended lower.

    What’s driving markets

    Stocks opened higher after a flurry of economic data including a fourth quarter GDP report that came in stronger than expected, but the focus was on the latest batch of earnings, which helped to revive investors’ optimism following disappointing guidance from Microsoft Corp.
    MSFT,
    +1.35%
    earlier in the week.

    The economy grew at a robust 2.9% annual pace to close out 2022, according to the first estimate of fourth quarter GDP, released Thursday morning — the latest sign that the U.S. economy is holding up well despite the Federal Reserve’s aggressive interest-rate hikes.

    “Thursday’s GDP report suggests that the economy is relatively strong even in the face of aggressive measures by the Federal Reserve to calm inflation,” said Carol Schleif, chief investment officer, BMO Family Office, in emailed commentary.

    Stocks rose after the data were released as investors found solace in the latest signs that a soft landing for the U.S. economy — a scenario where growth slows, but a recession is avoided — remains possible, or even likely.

    “This is a bit of a relief rally,” said Christopher Zook, chairman and chief investment officer of CAZ Investments.

    However, corporate earnings and guidance are still the primary concern for investors, along with expectations about when the Federal Reserve will cut interest rates, Zook said.

    The labor market also showed signs of strength despite more reports of layoffs in the tech, finance and media spaces, as the number of Americans filing for unemployment benefits fell to their lowest level since April. Investors also digested durable goods orders for December. New home sales for December will be published at 10 a.m. ET.

    Investors also celebrated a surge in Tesla Inc.
    TSLA,
    +9.64%
    shares premarket after the firm released well-received results that showed record quarterly profits.

    Disappointing guidance from technology behemoth Microsoft had clobbered stocks on Wednesday as traders worried it signaled not just difficulties for the sector but also broadly worsening economic conditions.

    However, before the end of Wednesday’s session, Microsoft shares had recovered most of their 4.5% loss and the S&P 500 finished the session almost exactly where it began, according to data from FactSet.

    As for the Federal Reserve, the central bank is expected to slow the pace of interest rate hikes when it next week raises its policy rate by 25 basis points to a range of 4.5% to 4.75%.

    Companies announcing results on Thursday include: McDonald’s
    MCD,
    -0.28%    ,
    Intel
    INTC,
    -0.34%    ,
    Comcast
    CMCSA,
    +0.86%    ,
    Visa
    V,
    +0.15%    ,
    Dow
    DOW,
    -1.16%    ,
    Whirl pool
    WHR,
    -0.91%    ,
    Western Digital
    WDC,
    +3.72%
    and Northrop Grumman
    NOC,
    -0.90%    .

    Companies in focus

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  • How to Adjust Your Marketing to Survive a Recession

    How to Adjust Your Marketing to Survive a Recession

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    Opinions expressed by Entrepreneur contributors are their own.

    With the economic slowdown of 2022 still fresh on everyone’s minds, the possibility of a deeper recession in 2023 is a daunting thought for businesses everywhere. Analysts at Bloomberg suggest there’s a 100% chance of a recession in the coming year, and any business that isn’t prepared could be put in jeopardy.

    However, with the right marketing strategies, companies can not only prepare for the worst but also come out on top. Marketing budgets account for up to 40% of a firm’s expenses from revenue, so it’s essential to be strategic about how you allocate your marketing dollars. Here are five tips to ensure your company stays afloat during a 2023 recession:

    Related: 6 Recession-Proof Business Marketing Strategies

    1. Focus on long-term ROI

    During a recession, it can be tempting to cut expenses that don’t show an immediate ROI. Content marketing, for instance, takes time to show results because it can take weeks or even months for content to rank, for your website’s authority to grow and for people to start trusting your brand as a thought leader.

    Once your content gains traction, however, the rewards can be long-lasting. Put your marketing budget into creating quality content that will still be relevant a year from now. It’s the best way to ensure you have a steady stream of leads long after the recession has ended.

    Interactive content is one strategy that is especially effective in this regard, as it can be easily shared and often creates long-term engagement. My company, involve.me, makes it easy to create interactive content with no technical skills needed.

    In comparison, advertising spend can bring immediate results, but it might not last. Like a faucet, if you reduce advertising spend, or as ads simply become less effective over time, you’re going to lose leads and sales. If there’s little organic traffic to make up for lost advertising, you may find yourself in a worse situation than when you started.

    2. Take advantage of low-cost channels

    While it’s valuable to experiment with different marketing channels, they can have wildly different costs. In the last Super Bowl, for instance, 30-second commercials cost around $6.5 million and reached an average of 106 million viewers.

    That’s a CPM (cost per mile, or cost per thousand views) of around $61. That could be an effective investment for some companies, but it’s not practical for most. The CPM for TikTok ads, in comparison, ranges from $0.50 to $10, and it’s possible to reach a large audience without ads at all.

    Organic TikTok videos, from dance challenges to creative product demonstrations, can go viral and create a massive amount of impressions. This is a great option for companies that don’t have the budget for expensive ads but want to reach a large audience.

    3. Go local

    During a recession, it’s important to focus on your local area. Local businesses are more insulated from the volatility of the stock market and international trade wars, and they generally have more loyal customers.

    Make sure your website and other marketing channels are optimized for local search, and consider running hyper-local campaigns for your products or services. Also, look for opportunities to partner with other businesses in your area. This can help you get your message out to a larger audience and build trust with potential customers.

    You can also use your marketing budget for physical campaigns, such as sponsoring a local event or running a cost-effective ad in the local newspaper. This will help you reach potential customers in your area and build a base of loyal customers that will stick with you even when the economy recovers.

    Further, local search engine optimization (SEO) is becoming increasingly important. Investing in local SEO means you can reach potential customers who are actively searching for services in your area.

    Related: Why You Should Never Skimp on Brand Marketing in a Recession

    4. Focus on reducing churn

    Even in the best of times, customer churn can be a major issue. Like pouring water in a leaky bucket, it’s hard to keep customers if you’re constantly losing them.

    During a recession, when businesses are struggling for customers and revenue, it’s especially important to focus on reducing churn. Invest in customer retention strategies such as loyalty programs, customer feedback systems and personalized offers. This will help you keep your existing customers and build relationships with them so they are more likely to stay with you in the future.

    In practice, these systems don’t need to be complicated. For example, you can track customers who haven’t used your product or service in a certain amount of time, and then email them with a personalized offer or reminder. In that email, you can also include a feedback survey to help you understand why they haven’t been back and what you can do to win them back.

    5. Double down on automation

    Finally, consider investing in automation and process optimization. During a recession, it can be tempting to cut costs and staff, but automation can actually help your business become more efficient and increase your profits.

    Invest in automation software for your marketing, sales and customer service teams. This can help you save time and money by automating repetitive tasks, such as email campaigns and lead qualification. This will free up your team to focus on more important tasks and help you get better results from your marketing and sales efforts.

    Popular tools such as Zapier and IFTTT can be used to automate tasks and workflows, and they’re very low-cost.

    Related: 3 Strategies to Reach Customers in an Economic Downturn

    The 2023 recession is almost inevitable, and many businesses will struggle to survive. However, with the right marketing strategies, you can not only make it through the recession but also come out on top. By focusing on long-term ROI, taking advantage of low-cost channels, going local, reducing churn and investing in automation, you can ensure your business is well-positioned for success in the years ahead.

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    Vlad Gozman

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