7 financial advisers on what they are doing in 2023 to prepare for a recession

A number of high-profile financial firms are saying a recession is likely in 2023. Vanguard expects a “global recession,” Goldman Sachs economists give it a 35% chance, J.P. Morgan called for a “mild recession,” and Bloomberg economists said a recession is a 100% certainty.  So we asked financial advisers how they personally plan to weather a potentially impending recession in the new year:

High-grade municipal bonds and enough cash to weather a downturn – Craig Evans Carnick at Transform Wealth

“As an adviser who has spent 40 years watching economic markets fluctuate high, low and everywhere in between, my answer is simple: I’m standing pat, as they say in blackjack. As I have always advised my clients, the most critical aspect of dealing with any economic downturn is the ability to have enough cash to weather the financial storm. My personal portfolio is 50% high-grade municipal bonds and the income from that portfolio alone would be enough to sustain my family during any recession, plus my cash position is two years of additional income. Cash is king in a recession,” says certified financial planner Craig Evans Carnick at Transform Wealth.

Tilt towards value-oriented companies – Joe Favorito of Landmark Wealth Management

While certified financial planner Joe Favorito of Landmark Wealth Management says that he focuses more on long-term asset allocation, rather than market timing, he does note that last year he “made more of a tilt towards value-oriented companies” assuming that rates would go higher.  And he’ll do the same this coming year. “Value stocks tend to outperform growth stocks in a rising rate environment as well as during periods of market turmoil which tend to precede a recession,” says certified financial planner Joe Favorito at Landmark Wealth Management. 

Looking for a financial adviser? This tool can help match you with an adviser who might meet your needs.

Think long-term and don’t try to time a recession – Anthony Ferreira at WorthPointe

Ferreira, a certified financial planner, says he has a systematic approach to investing that he sticks with, including a mix of stocks and bonds that are globally diversified. 

“The best strategy for building portfolios is to make it so that they can weather the ups and downs of the market as it is so unpredictable. Even when we think we know something is going to happen, we don’t know exactly when,” he says. “I don’t recall anyone that called the bottom of the 2008/2009 recession accurately. By the time we’re aware of boom and bust cycles, the market has already moved or adjusted in anticipation of these events. It’s best to have a systematic approach to your investing that you stick with during ups and downs.”

He also has a buffer of cash and other low volatility liquid assets to help him ride out the market’s ups and downs. “There are many ways to accomplish this that can be appropriate for different people,” says Ferreira.

Keep a globally diversified portfolio – Jeff Bernier at Tandem Growth

Certified financial planner Bernier says he will “continue to own a broadly diversified portfolio tilted towards companies that have higher expected returns, and stocks that have lower price to fundamentals and are more profitable.” He adds: “While stocks may decline much further in a recession, some of this is already in the current prices. Also, don’t forget to diversify globally.” 

Be wary of full-time hiring as a business owner – Mark Struthers at Sona Wealth Advisors 

“Most financial advisers are very susceptible to market downturns since we are paid based on a percentage of assets under management. Our revenue can easily decline 20%+ during a downturn, like now. I am reluctant to lay off employees and instead I try to be tactical. I recently had a paraplanner quit and I plan on using contract work until we have more clarity on the economy,” says Mark Struthers, a certified financial planner.  

Create priorities for 2023 –  Bobbi Rebell, author of Launching Financial Grownups

Rebell, a certified financial planner, says she and her family are now creating priorities for 2023. “Have a clear understanding of what your life costs and plan for how you would cover those costs if you had either an income reduction or total interruption … It also makes sense to assess how your behavior has changed during different seasons of life. Odds are in the most recent season, you’ve spent more traveling and socializing. Consider taking a pause over the winter months to replenish your savings and also be intentional when it comes to planned spending in 2023 after the late 2022 splurge,” says Rebell, a certified financial planner. 

Protect your identity even more now – Taylor Jessee at Impact Financial

“In a more practical sense, one thing I’m doing is becoming much more intentional about my identity protection. I can’t say for certain because identity theft is on the rise as-is, but if the economy gets tougher, I have a hunch that crooks will work even harder to commit ID theft and fraud. For that reason, I’m reducing the number of credit cards I carry in my wallet in case it’s stolen, shredding any piece of mail with my name and address on it, activating 2-factor authentication for online logins, not using my debit card and minimizing the number of checks I write,” says certified financial analyst Jessee.