man in gold and white costume

I’m hearing more and more warnings from business leaders and money managers about a posssible recession looming.

The latest is from Jamie Dimon, CEO of JPMorgan Chase (JPM) who warns of a possible recession in the US in 6-9 months‘ time.

He advised investors that “to guess is hard, be prepared”. I found his advise worth serious consideration, even more so now as we just got hot CPI numbers which will galvanise the Fed to continue hiking aggressively.

The key message is not to make financial or investment decisions based on our guess of whether there will be a recession or not, or whether the recession will be mild or deep. We should be preparing our personal finances and portfolios for the possible outcomes or worst-case scenarios.

CPI still running hot

US CPI for September came in stronger than expected at +8.2% YoY and +0.4% MoM.

Stocks fall sharply immediately after CPI was out but recovered later to actually end up green for the day!? S&P 500 closed up +2.6%. Wow. Maybe investors are thinking that inflation has peaked despite still being pretty high. 🤷‍♂️

IMO during this period CPI is the most important number, which drives Fed interest rate policy, which in turn drives stock prices. Looking at the US CPI trend, it does seem like inflation might have peaked and is stabilising.

Source: Trading Economics

Fed sticking to its guns

That said, the Fed is sticking to its guns and have made it clear that they will continue to hike rates until inflation cools closer to its 2% long-term target. The Fed seems to view inflation as a greater threat than a recession, and might be willing to push the US economy into recession to avoid inflation running away.

That means there’s likely more pain ahead for stocks in the short to mid term. We might not see a sustained recovery in stocks until we see inflation start to cool off and the Fed start to slow rate hikes.

How I’m preparing for a recession

Personally, I think it’s too late to buy inflation hedges. Like many I see in the market, I’m also mostly buying government bonds as interest rates rise and gradually deploying cash into the market opportunistically as stocks continue to fall. I’m mainly buying broad-market ETFs and a handful of beaten-down tech stocks.

That’s aside from our regular monthly DCA into core ETFs through FSMOne, Syfe Core Equity100 and Syfe REIT+, which is around half of our monthly contribution to investment funds.

I also intend to transfer some of my CPF OA to SA to earn higher risk-free interest rates. I’m thinking we might also see SA interest rates increase soon in light of higher interest rates.

On the family finances side, we’re scrutinising expenses more closely and keeping our debt levels in check. So far, I don’t see the need to make drastic spending cuts just yet but if we do get a deeper recession than expected, we might have to further tighten our belts.

How are you preparing for a possible recession?

Follow me on Facebook, Telegram, Twitter and Youtube.

Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

Download my FREE Ebook: How to Start Investing in Stocks for Beginners

For more investing tips, visit my Guide page.

For more investing resources, see my Referrals page.

Disclosure: This post may contain affiliate links and I may get a commission when you click on the links or open an account through the links, at no additional cost to you. I only recommend products or services that I have personally tried and have found useful.