5 Ways to Prepare for the COVID-19 Recession with COVID + Credit
Is the US economy currently experiencing a downturn?
Indeed, the year is starting with little signs of progress, as the late-year spread of omicron, along with the fading tailwind of fiscal stimulus, has experts across Wall Street lowering their GDP projections.
When you add in a Federal Reserve that has shifted from its most accommodative policy in history to hawkish inflation-fighters, the picture changes dramatically. The Atlanta Fed’s GDPNow indicator currently shows a 0.1 percent increase in first-quarter GDP.
“The economy is slowing and downshifting,” said Joseph LaVorgna, Natixis’ head economist for the Americas and former chief economist for President Donald Trump’s National Economic Council. “It isn’t a recession now, but it will be if the Fed becomes overly aggressive.”
GDP climbed by 6.9% in the fourth quarter of 2021, capping a year in which the total value of all goods and services produced in the United States increased by 5.7 percent on an annualized basis. That followed a 3.4 percent drop in 2020, the steepest but shortest recession in US history, caused by a pandemic.
During a recession, what happens to your money at the bank?
Benda said the rapid outflow of withdrawals has subsided, but he expects them to resume once people receive their stimulus checks from the federal government. “If another spike happens, the system has a lot of spare capacity,” he said.
He did warn, though, that people’s stimulus money is probably safer in the bank: “Once that money leaves the bank… there’s no insurance on it.” He warned, “You could get robbed.” “Robbing a bank is far more difficult than robbing a person.”
The FDIC, which was established in 1933 after the Wall Street crisis of 1929 and the advent of the Great Depression saw thousands of banks fail, is a major cause for this. Since the FDIC’s inception, no depositor has ever lost a penny of the money it protects.
The bank is a safe place for your money, even if it fails
The 2008 financial crisis began in the financial sector and spread throughout the economy. This time, the crisis is originating in the broader economy, with businesses closing and millions of Americans losing their jobs, and then spreading to the banking sector.
The government is taking steps to ensure that banks have the funds they require right now, and banks are better capitalized this time around than they were the last time, which means they are better financially prepared to weather the storm. Banks are also encouraged to use the Federal Reserve’s “discount window” to obtain loans if they require them in order to continue lending to individuals and businesses. The Federal Reserve said last month that the largest financial institutions have $1.3 trillion in common equity and $2.9 trillion in high-quality liquid assets. This was essentially a reassurance that the banks are fine, that they have access to a large amount of cash if they need it, and that the central bank will assist them if things go much worse.
Even still, banks, like the rest of the economy, are suffering right now. However, if your bank fails, your money isn’t lost, as long as it’s insured by the FDIC.
“If your bank fails for whatever reason, the government takes it over” (banks do not go into bankruptcy). In an email, Aaron Klein, policy director at the Brookings Institution’s Center on Regulation and Markets, stated that “this is frequently done on a Friday night, and by Monday morning your local branch is operating again, often as if nothing happened from the depositor’s point of view.” “In most cases, the FDIC seeks to locate a new bank to buy the failed bank (or at least its accounts), and your money is automatically transferred to the new bank (just as if they had merged).” If not, the FDIC will continue to operate your old bank under a new name until they can find a new bank to take over your accounts.”
For example, in early April, the FDIC shuttered the First State Bank of Barboursville, a tiny bank in West Virginia. MVB Bank has taken over its deposits, and the bank’s branches will reopen as well. As a result, those who had previously banked with First State Bank have switched to MVB.
What should I put away in case of economic collapse?
Having a strong quantity of food storage is one of the best strategies to protect your household from economic volatility. In Venezuela, prices doubled every 19 days on average. It doesn’t take long for a loaf of bread to become unattainable at that pace of inflation. According to a BBC News report,
“Venezuelans are starving. Eight out of ten people polled in the country’s annual living conditions survey (Encovi 2017) stated they were eating less because they didn’t have enough food at home. Six out of ten people claimed they went to bed hungry because they couldn’t afford to eat.”
Shelf Stable Everyday Foods
When you are unable to purchase at the grocery store as you regularly do, having a supply of short-term shelf stable goods that you use every day will help reduce the impact. This is referred to as short-term food storage because, while these items are shelf-stable, they will not last as long as long-term staples. To successfully protect against hunger, you must have both.
Canned foods, boxed mixtures, prepared entrees, cold cereal, ketchup, and other similar things are suitable for short-term food preservation. Depending on the food, packaging, and storage circumstances, these foods will last anywhere from 1 to 7 years. Here’s where you can learn more about putting together a short-term supply of everyday meals.
Food takes up a lot of room, and finding a place to store it all while yet allowing for proper organization and rotation can be difficult. Check out some of our friends’ suggestions here.
Investing in food storage is a fantastic idea. Consider the case of hyperinflation in Venezuela, where goods prices have doubled every 19 days on average. That means that a case of six #10 cans of rolled oats purchased today for $24 would cost $12,582,912 in a year…amazing, huh? Above all, you’d have that case of rolled oats on hand to feed your family when food is scarce or costs are exorbitant.
Basic Non-Food Staples
Stock up on toilet paper, feminine hygiene products, shampoo, soaps, contact solution, and other items that you use on a daily basis. What kinds of non-food goods do you buy on a regular basis? This article on personal sanitation may provide you with some ideas for products to include on your shopping list.
Medication and First Aid Supplies
Do you have a chronic medical condition that requires you to take prescription medication? You might want to discuss your options with your doctor to see if you can come up with a plan to keep a little extra cash on hand. Most insurance policies will renew after 25 days. Use the 5-day buffer to your advantage and refill as soon as you’re eligible to build up a backup supply. Your doctor may also be ready to provide you with samples to aid in the development of your supply.
What over-the-counter drugs do you take on a regular basis? Make a back-up supply of over-the-counter pain pills, allergy drugs, cold and flu cures, or whatever other medications you think your family might need. It’s also a good idea to keep a supply of vitamin supplements on hand.
Prepare to treat minor injuries without the assistance of medical personnel. Maintain a well-stocked first-aid kit with all of the necessary equipment.
Make a point of prioritizing your health. Venezuelans are suffering significantly as a result of a lack of medical treatment. Exercise on a regular basis and eat a healthy diet. Get enough rest, fresh air, and sunlight. Keep up with your medical and dental appointments, as well as the other activities that promote health and resilience.
What will the state of the US economy be in 2021?
While GDP fell by 3.4 percent in 2020, it increased by 5.7 percent in 2021, the fastest pace of growth since 1984. With a total GDP of $23 trillion, the United States remains the world’s richest country. In addition, average hourly wages have risen 10% from $28.56 in February 2020 to $31.40 in December 2021.
What is the state of the economy in 2021?
“While Omicron will slow growth in the first quarter, activity is projected to pick up nicely once the newest pandemic wave has passed and supply-chain issues have been resolved,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
“As it navigates underlying economic strength, rising labor shortages, and stubbornly high inflation, the Fed will need to remain ‘humble and flexible.'”
The economy increased at its fastest rate since 1984 in 2021, with the government providing roughly $6 trillion in epidemic relief. In 2020, it shrank by 3.4 percent, the most in 74 years.
President Joe Biden swiftly claimed credit for the outstanding performance, calling it “no accident.”
After Congress failed to approve his key $1.75 trillion Build Back Better legislation, Biden’s popularity is declining amid a stalled domestic economic plan.
In a statement, Biden said, “We are finally building an American economy for the twenty-first century, and I urge Congress to keep this momentum going by passing legislation to make America more competitive, strengthen our supply chains, strengthen our manufacturing and innovation, invest in our families and clean energy, and lower kitchen table costs.”
According to the government’s advance GDP estimate, gross domestic product increased at a 6.9% annualized pace in the fourth quarter. This follows a third-quarter growth rate of 2.3 percent.
However, by December, the impetus had dissipated due to an assault of COVID-19 infections, spurred by the Omicron variety, which contributed to lower expenditure and disruption at factories and service organizations. However, there are hints that infections have peaked, which could mean a surge in service demand by spring.
Inventory investment surged by $173.5 billion, accounting for 4.90 percentage points of GDP growth, the highest level since the third quarter of 2020. Since the first quarter of 2021, businesses have started reducing inventories.
During the epidemic, people’s spending shifted from services to products, putting a strain on supply systems. GDP rose at a sluggish 1.9 percent rate, excluding inventories.
On Wall Street, stocks were trading higher. Against a basket of currencies, the dollar rose. Treasury yields in the United States have fallen.
The minor increase in so-called final sales was interpreted by some economists as a sign that the economy was about to decline severely, especially if not all of the inventory accumulation was planned. They were also concerned that rate hikes and diminished government aid, particularly the elimination of the childcare tax credit, would dampen demand.
“Fed policymakers will have to tread carefully when raising interest rates,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “Every other Federal Reserve in history has raised interest rates too high and brought the economy crashing back down.”
Last quarter’s growth was also boosted by a surge in consumer spending in October, before falling sharply as Omicron raged. Consumer expenditure, which accounts for more than two-thirds of GDP, increased by 3.3 percent in the fourth quarter after increasing by 2.0 percent in the previous quarter.
Increases in spending on healthcare, membership clubs, sports centers, parks, theaters, and museums balance a decline in purchases of motor vehicles, which are scarce due to a global semiconductor shortage.
Inflation rose at a 6.9% annual pace, the fastest since the second quarter of 1981, far beyond the Federal Reserve’s target of 2%. As a result, the amount of money available to households fell by 5.8%, limiting consumer expenditure.
Households were still buffered by large savings, which totaled $1.34 trillion. Wages increased by 8.9% before accounting for inflation, indicating that the labor market is experiencing a severe labor shortage, with 10.6 million job opportunities at the end of November.
Though the job market slowed in early January as Omicron rose, it is now at or near full employment. Initial jobless claims fell 30,000 to a seasonally adjusted 260,000 in the week ending Jan. 22, according to a second Labor Department report released on Thursday.
Claims decreased dramatically in Illinois, Kentucky, Texas, New Jersey, New York, and Pennsylvania.
Last quarter’s GDP growth was aided by a resurgence in corporate equipment spending. Government spending, on the other hand, has decreased at the federal, state, and municipal levels.
After being a drag on GDP growth for five quarters, trade made no contribution, while homebuilding investment fell for the third quarter in a row. Expensive building materials are constraining the sector, resulting in a record backlog of homes yet to be built.
Despite the economy’s difficulties at the start of the year, most experts predict the good luck will continue. This year’s growth forecasts are at least 4%.
“This year, the economy could be even better,” said Scott Hoyt, a senior economist with Moody’s Analytics in West Chester, Pennsylvania. “The economy will stagnate, and monthly employment increases will fall short of last year’s high levels. Nonetheless, by the end of the year, the economy should be close to full employment and inflation should be close to the Fed’s target.”
(Paragraph 7 was removed from this story because it contained incorrect information.)
What is the state of the US economy in 2022?
According to the Conference Board, real GDP growth in the United States would drop to 1.7 percent (quarter-over-quarter, annualized rate) in Q1 2022, down from 7.0 percent in Q4 2021. In 2022, annual growth is expected to be 3.0%. (year-over-year).
Should I withdraw all of my savings from the bank during a recession?
An FDIC-insured bank account is one way to keep your money safe. You’re probably already protected if you have checking and savings accounts with a traditional or online bank.
If an FDIC-insured bank or savings organization fails, you are protected by the Government Deposit Insurance Corp. (FDIC), an independent federal agency. In most cases, depositor and account protection at a federally insured bank or savings association is up to $250,000 per depositor and account. This comprises traditional banks as well as online-only banks’ checking, savings, money market, and certificate of deposit (CD) accounts. Accounts at credit unions insured by the National Credit Union Administration, a federal entity, are subject to the same $250,000 per-depositor coverage limit. So, if you and your spouse had a joint savings account, each of you would have $250,000 in FDIC coverage, totaling $500,000 in the account.
If you’re unsure whether your accounts are FDIC-insured, check with your bank or use the FDIC’s BankFind database to find out.
For your emergency money, an FDIC-insured account is also a good choice. Starting an emergency fund, if you don’t already have one, can give a cash cushion in the event that you lose your job or have your working hours reduced during a recession.
In general, you should have enough money in your emergency fund to cover three to six months’ worth of living expenditures. If you’re just getting started, put aside as much money as you can on a weekly or per-paycheck basis until you feel more comfortable fully financing your emergency fund. Anything you can put aside now could come in handy if your financial condition deteriorates.
Which bank is the safest to keep money in?
We kept our emphasis on the top 50 banks by assets with a significant retail banking presence, therefore the fiduciary banks of State Street Corporation (NYSE:STT) and Bank of New York Mellon (NYSE:BK) were excluded despite meeting our first screening criteria. Even while it appears unlikely that depositors would be at risk with “problem banks” such as Citigroup Inc. (NYSE:C) and Bank of America Corporation (NYSE:BAC), they were exempt. We also avoided regional banks in the troublesome Southeast and the entire Pacific Coast, where so many people experienced financial difficulties as a result of housing and lending during and after the crisis. Some of the larger banks that have lately been involved in mergers and acquisitions were left off the list. Finally, banks where we had worries about their sustainability and existence after another recession were completely removed.
Wells Fargo & Company is number one.
Now that JP Morgan Chase & Co. (NYSE:JPM) has come under examination, Wells Fargo & Company (NYSE:WFC) is the indisputable safest bank in America even though Chase has approximately $1 trillion more in assets. With over 6,200 storefront branches and over 12,000 ATMs, Wells Fargo is present in practically every state in the United States. The bank’s total assets exceed $1.3 trillion. Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-A) holds close to $13 billion worth of common shares in this bank, and that holding is growing. The company has a market capitalization of $171 billion dollars. The stock is trading at a price that is less than 9 times earnings and nearly 1.2 times book value. The bank’s return on equity is little over 12%, and common shareholders receive a 2.7 percent dividend yield. While the stock is now trading at roughly $32.50 per share, Wall Street values the top bank at nearly $38.00 per share.
JP Morgan Chase & Co. is the second largest bank in the United States. Despite the public attention surrounding JP Morgan Chase & Co.’s (NYSE:JPM) multibillion-dollar trading loss, the company is nevertheless doing well in comparison to many of its competitors. With $2.3 trillion in assets, it boasts a fortress-like balance sheet, and CEO Jamie Dimon stated the only risk to the bank’s failure is a collision between the earth and the moon. Despite the share price drop as a result of the trading loss, the corporation still has a market capitalization of $135.17 billion. JP Morgan’s stock is valued at less than 8 times earnings and 0.7 times book value. The company’s return on equity is 9.8%, and its ordinary stock has a dividend yield of 3.4 percent. While the bank’s stock is now selling at slightly over $36, experts estimate that the corporation is worth $47 per share.
U.S. Bancorp is the third largest bank in the United States. Because it is a super-regional based in Minneapolis, U.S. Bancorp (NYSE:USB) is frequently neglected as a money-center bank. It is the country’s fifth-largest commercial bank, with millions of customers. U.S. Bancorp has $341 billion in assets, over 3,000 branch locations, over 5,000 ATMs, and activities in 25 states across the United States. Berkshire Hathaway Inc. (NYSE:BRK-A), which is owned by Warren Buffett, holds 69 million shares worth more than $2.1 billion. The bank has a market capitalization of $59 billion. It is valued at approximately 10 times profits and 1.6 times book value. The return on equity is exceptionally strong, at 16 percent, and the common shareholders receive a 2.5 percent dividend yield. Shares of this wonderful safe bank are currently trading around $31.50, with Wall Street analysts projecting a price objective of roughly $34.25 for this excellent safe bank.
M&T Bank Corporation is the fourth largest bank in the United States. M&T Bank Corporation (NYSE:MTB) is situated in Buffalo, New York, and has a market capitalization of more than $79 billion. M&T had almost 700 branches, 2,000 ATMs, and a presence in eight states, excluding any recent modest purchases. The stock has a market capitalization of $10.12 billion, a P/E ratio of 12.7, and a price-to-book value of only 1.07. M&T has a 9.5 percent return on equity and pays a 3.5 percent dividend to common investors. The stock is currently trading just around $80 per share, but analysts have set a price target of around $90. Berkshire Hathaway Inc. (NYSE: BRK-A) owns over 5.4 million common shares of M&T Bank, valued at more than $400 million.
PNC Financial Services is number five. PNC Financial Services (NYSE:PNC) is headquartered in Pittsburgh and has almost $300 billion in assets, as well as over 2,500 locations and nearly 7,000 ATMs in 14 states. Its stock is valued at 10.6 times profits and less than 0.9 times book value, with a market capitalization of $31.01 billion. The company’s return on equity is 8.9%, and it pays a 2.73 percent dividend. The stock is now selling for under $59, while Wall Street is anticipating a price of $70.50. PNC was even financially strong enough to close its National City acquisition at the end of 2008, when the financial markets were rife with risk. PNC controls over a quarter of BlackRock Inc., the world’s largest asset management organization (NYSE:BLK).
KeyCorp (number six) The only exception to our rule about stock prices under $10.00 is KeyCorp (NYSE:KEY). Its other measures more than compensate for this blip. It has a market capitalization of roughly $7.12 billion and assets worth $87 billion. It serves 14 states in the Rocky Mountain region, the Northwest, the Great Lakes region, and the Northeast. Given that KeyCorp is headquartered in Cleveland, where many bad loans have arisen, their inclusion on the list is impressive. The bank boasts a 9.2 percent return on equity and offers a 2.7 percent dividend yield. The stock is now trading at $7.50, but Wall Street has set a target price of $9.00.
7. BOK Financial Corporation With a market value of $3.8 billion and assets of $26 billion, BOK Financial Corporation (NASDAQ:BOKF) is the smallest bank on the list. Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas, and Colorado State Bank and Trust are the bank holding company’s common branch names in various states. BOK is priced at 1.3 times book value and is worth roughly 12.5 times profits. It has an 11 percent return on equity and a 2.7 percent dividend yield for common stockholders. The stock is currently trading around $56.00, and Wall Street analysts have a price objective of $59.00.
Should you put all of your money in a bank account?
Are you debating whether it’s better to store your money at home or in the bank? Keep reading because this article is written specifically for you.
Many people believe that keeping your money at home is the safest and most prudent option. But the truth is that if you don’t store your money in a bank, you’re taking an unnecessary risk and, worse, you’re losing money. And it’s for this reason that, before we go any further, I’d want to address a critical question: is it preferable to keep money at the bank or at home?
To summarize, it is preferable to keep your money in a bank rather than at home. For starters, banks have insurance that helps you to recover your funds in the event of unauthorized withdrawals or charges. Furthermore, by storing your money in the bank, you will be able to earn interest, which is not feasible when you store it at home.
So, if you keep your money at home, it’s definitely time to transfer it from your sock drawer to a savings account. Continue reading if you’re still not sure if it’s a good idea.
I’ll go through a few of the primary reasons why you should keep your money in the bank in the rest of this article.