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Stocks were in a panic on Monday as a weak jobs report and growing concerns about a U.S. recession loomed. Global markets faced massive selloffs after news broke that the unemployment rate rose from 4.1% in June to 4.3% in July (the highest since October 2021).
Last week, the Federal Reserve voted to keep interest rates steady, and Federal Reserve Chairman Jerome Powell cited a strong jobs market. Now, with data showing the economy is slowing more than expected, many are pressuring the Fed to cut rates significantly in September or to make an emergency rate cut before its next meeting.
Aaron Sherman, a certified financial planner and president of Odyssey Group Wealth Advisors, says the latest jobs report suggests that interest rates are headed lower. But he also cautions against jumping to conclusions too quickly. Market activity, driven by investor expectations, is often volatile.
“We’re seeing the emotional side of the market right now,” Sherman said. “The sentiment is suddenly going from ‘everything is fine’ to ‘the sky is falling’ for no good reason. Yes, there are signs that the economy is slowing down, but it’s not falling off a cliff.”
Here’s what experts say about the market panic and what you can do now.
Worried about a recession? Here’s what experts have to say.
Last week’s jobs report showed a rise in unemployment and a surge in layoffs, raising concerns about a recession. “This report was weak across the board, unlike the past few months,” said Robert Fry, chief economist at Robert Fry Economics.
Economic growth is slowing, but Sherman doesn’t see enough consistent signs that we’re headed into a recession.
Although we may not be officially in a recession, American households have been hit hard by inflation, high borrowing costs, and an uncertain economy.
As job losses mount, it’s important to plan ahead and focus on what you can control. Even if the Fed cuts rates next month, the economy has ups and downs and things don’t change overnight. Monitoring the markets and taking steps to protect your finances is something you can directly control.
Build an emergency fund
Bola Sokunbi, founder of Clever Girl Finance, recommends having an emergency fund. An emergency fund gives you some extra cash to draw on if you unexpectedly lose your job or have unexpected bills.
If you are already struggling to make ends meet, building an emergency fund can be slow and difficult. Start by reviewing your budget to see if there are any expenses you can cut or reduce, even temporarily. Then focus on moving any extra money into a high-yield savings account.
“Setting up automatic transfers to your savings account can help you save consistently. Even small, recurring deposits add up over time,” says Sokunbi. For example, if you can free up $50 a month by canceling your streaming subscriptions and move $100 a month from your biweekly paycheck to your savings account, you could save more than $3,000 a year.
The compound interest of a high-yield savings account or CD can help you grow your savings even further. Long-term CDs can help you secure a solid annual yield, which can provide you with greater returns and less temptation to spend.
Keep your resume up to date
If you’re worried about losing your job, Save My Cents founder Shang Saavedra suggests keeping your resume up to date and your network up to date. Add your latest jobs, skills, and responsibilities, and include all your references, awards, and certifications. This will ensure that you have your resume ready when you need to start looking for a job.
“I network by meeting with industry peers and friends on a regular basis,” Saavedra said. You can also expand your network and make new connections when the time comes to stand out.
Pay off high-interest debt
If you’ve had trouble paying off high-interest debt, like credit card debt, Jason Steele, a member of the Expert Review Board and a personal finance expert, recommends contacting your credit card issuer to discuss your options. They may be able to set up a repayment plan for you, temporarily lower your interest rate, or put you in a credit deferral. You can also explore 0% balance transfer offers or debt consolidation loans to take a break from interest charges.
Author and credit card expert Jerry Debweiler says if you’re having trouble paying your credit cards, don’t wait for a rate cut to get relief. Debweiler also recommends consulting with a qualified debt relief professional.
We recommend the National Foundation for Credit Counseling and the Financial Counseling Association of America. The Department of Justice website also has a list of approved credit counseling services in every state.
Take a long-term approach to investing
When stocks are low, it may seem like an ideal time to change your portfolio. But it can be a slippery slope for investments you’ve already made, and experts say it’s best to focus on long-term diversification rather than knee-jerk reactions.
“When stocks go down, you get poorer, which is bad,” Fry said. But he noted that asset allocation is fine as long as the positive and negative effects are balanced. Take the time to review your risk tolerance and investment goals.
