It seems like you hear talk of recession virtually everywhere you go nowadays. Will we have one? Will we manage to avoid one? If we have one, how bad will it be and how long will it last? Even the experts fail to agree.
Factors Indicating Recession
Those who insist that a recession is inevitable cite three main indicators:
- Federal Reserve interest rate hikes
- Stock market performance
The Congressional Budget Office predicted in May that the Consumer Price Index would rise 6.1% this year and an additional 3.1% in 2023. However, between May 2021 and May 2022, the CPI rose 8.6%, the largest increase for a 12-month period since December 1981.
By June, it stood at 9.1%, with rate increases for some key industries as follows:
- Fuel oil: 98.5%
- Gasoline: 59.9%
- Natural gas: 38.4%
- Airline fares: 34.1%
- Electricity: 13.7%
- Food: 12.2%
- New vehicles: 11.4%
2. Federal Reserve Interest Rate Hikes
In March 2022, the Fed raised interest rates by 0.25 percentage points, the first hike in three years.
The second hike, this time 0.50 percentage points, occurred in May and represented the largest hike in two decades.
The third hike in June raised rates another 0.75 percentage points, a massive increase not seen since 1994.
3. Stock Market Performance
In the meantime, the S&P 500 index decreased by 21.3% during the first six months of this year. Perhaps not surprisingly, the crypto markets have fared even worse. So far this year, Bitcoin has lost upwards of 60% of its value, while Ethereum has lost an alarming 70+%.
Despite the above gloom and doom facts, some experts nevertheless insist that recession fears are overblown.
Specifically, they claim that the economy is slowing, not actually shrinking. They expect 2022 GDP growth to be somewhere around 2.6% for the full year.
Preparing For Whatever Comes
Whichever side you agree with, there’s no doubt that uncertainty is the word of the year. There’s likewise no doubt that uncertain times call for decisive action on your part to protect what you have no matter what happens. Not only is this true with regard to your stock portfolio, but also with regard to any commercial real estate investments you may have. This may be the perfect time to restructure these holdings.
Ah, a 1031 exchange you may say. Not necessarily. 1031 exchanges come with their own set of negatives. chief among them being the following:
- You must invest in like-kind property.
- You must find a suitable exchange property within 45 days of selling your property.
- The entire transaction must be completed within 180 days of your sale.
Surely there must be a better way.
DST: the 1031 Exchange Alternative
There is. It’s called the Deferred Sales Trust and it’s the perfect alternative to a 1031 exchange. Gone are the hateful requirements. Gone are the restrictive time deadlines. Believe it or not, the DST can even rescue you from a 1031 exchange that’s about to fail or has already done so.
Like to Know More?
If the DST sounds too good to be true, rest assured it’s not. Contact Reef Point today. We’ll be happy to answer all your questions and explain in detail how this legal, tested and proven strategy can not only save you capital gains and income taxes, but can also make it possible for you to weather the current financial and economic crisis safely and profitably.