‘We’re not in a recession’: Financial expert Terry Savage provides midyear economic update in Schaumburg

Renowned financial expert Terry Savage explained how factors as diverse as the presidential election, two major wars, inflation, the stock market and job creation might converge in their impact on individuals this year to an audience of business leaders Tuesday in Schaumburg.

The author and media commentator was the keynote speaker at the Schaumburg Business Association’s Mid-Year Economic Update breakfast at Chandler’s Chophouse, Grille & Banquets.

“You wanted an economic forecast? Even the Fed chairman can’t figure it out,” she joked.

Despite having analyzed the economic impacts of so many factors and crises over her career, Savage said she can’t recall there ever being so many in play simultaneously. But, she added, the least she could do was identify them and separate fact from fiction.

Among the fictions, she said, recent polling shows large percentages of Americans believe the U.S. is in a recession and that the Standard & Poor’s stock market index has been down for the year.

She noted much media reporting on how financially squeezed Americans are feeling.

“We’ve all felt financially squeezed since we started working. Since when is there guaranteed happiness?” Savage said. “We’re not in a recession. How do you counter popular perception that things are bad?”

A recession is two consecutive quarters of negative growth. While it hasn’t happened, she said there are some indicators that the business cycle may be overdue for one.

One of these is the inverted yield curve — when the interest rates on short-term bonds exceed those of long-term bonds — that occurred in July 2022. The average time for such an event to be followed by a recession is 12 to 24 months, and so far the delay has been 23 months.

While inflation has improved, it’s still not where the Federal Reserve System would prefer it to be, Savage said. Predictions for its setting of the Consumer Price Index are a tenth of 1%, based on a belief that it’s probably in the Fed’s best interest to sit on the sidelines until after the presidential election.

“It’s really going to be a tough call of what the Fed does,” she said.

As far as the election goes, the stock market historically has been affected by it as well as being a predictor of outcome, according to Savage.

Election years often are the second-best of the four-year cycle, and the market does better when a sitting president is seeking reelection.

But the three months from July 31 to Oct. 31 often have been crucial in what happens on Election Day.

When the S&P is up during that period, the incumbent party has returned to power 85% of the time, Savage said. But when it’s not, there has been a shift in party control 89% of the time, she added.

Despite some undeniable stressors on the economy, Savage lists the stock market, home prices, new job creation and stable energy costs among the positives. She said it almost defies conventional wisdom how moderate oil prices have been amid a war in the Middle East and another in Eastern Europe.

“I don’t know what to make of that, but I consider it on the good news side of the ledger,” she added.

At the end of the day, no one has ever gotten rich betting against America, and this is as good a time as any for everyone to assess their own balance of risk and reward in investments and spending, Savage said.

That includes second-guessing some of what they are being told by their financial advisers. Learn how your broker is being compensated, she urged. While individuals don’t have to be the geniuses picking the stocks and allocations in their 401(k)s, they should at least understand their own tolerance for and exposure to risk.

In answer to a question, Savage said she supports the idea of student loan forgiveness despite recognizing the political motivation behind it. She added, much higher levels of debt have been forgiven by the nation in the past, and she doesn’t believe those who’ve invested in themselves and are most in need should be ineligible for the same treatment.

Instead of asking a question, the last audience member called on to speak thanked Savage for clarifying the misinformation she considered the biggest problem in today’s world.