Getty Images/Viva Tung/CNET
Stock markets were filled with panic on Monday in response to a weak jobs report and growing fears of a recession in the U.S. Global markets faced a major sell-off on news that the unemployment rate had risen to 4.3% in July from 4.1% in June — the highest level since October 2021.
Last week, the Federal Reserve voted to keep interest rates steady, with Fed Chairman Jerome Powell citing a strong job market. As data shows the economy is slowing more than expected, many are pressing the Fed to make a deep rate cut in September or even an emergency rate cut before the next meeting.
Aaron Sherman, a certified financial planner and president of Odyssey Group Wealth Advisors, says the latest jobs report suggests interest rates should fall. But he cautions against jumping to conclusions too soon. Market activity is often volatile, driven by investor expectations.
“We’re seeing the emotional side of the market right now,” Sherman said. “Market psychology [is] “It goes from ‘everything is fine’ to ‘the sky is falling’ without much justification. Yes, there are signs the economy is slowing, but it’s not falling off a cliff.”
Here’s what experts say about market panic and what you can do now.
Worried about a recession? Here’s what experts recommend
Last week’s jobs report sparked recession fears by showing a rise in unemployment and more layoffs. “The report was generally weaker than in previous months,” said Robert Fry, chief economist at Robert Fry Economics.
The economy is slowing, but Sherman believes we haven’t seen enough consistent signs that we’re entering a recession.
Whether we are officially in a recession or not, U.S. households have been severely affected by inflation, high borrowing costs, and an unstable economy.
As job losses mount, it’s important to plan ahead and focus on what you can control. Even if the Fed cuts interest rates next month, the economy ebbs and flows, and conditions never change overnight. Monitoring the market and taking steps to protect your finances is what’s within your immediate control.
Create an emergency fund
Bola Sokunbi, founder of Clever Girl Finance, recommends creating an emergency fund. This provides a safe haven in case you unexpectedly lose your job or get a surprise bill.
If you’re already struggling to make ends meet, building an emergency fund can be slow and difficult. Review your budget to see if there are any expenses you can cut or reduce — even temporarily. Then focus on funneling the freed-up money into a high-yield savings account.
“Setting up automatic transfers to your savings account can help you save consistently. Even small, regular deposits add up over time,” Sokunbi said. For example, if you could free up $50 a month by canceling a streaming subscription and then transfer an extra $100 from your paycheck every two weeks into a savings account, you could save more than $3,000 in a year.
Compound interest from high-yield savings accounts or CDs can help your savings grow even more. A longer-term CD can help provide a solid annual percentage yield that will give you more return and make spending less tempting.
Keep your resume up to date
If you’re worried about losing your job, Shang Saavedra, founder of Save My Cents, recommends keeping your resume up-to-date and your network fresh. Include your most recent job, skills, and responsibilities, and include your references, awards, and certifications. This way, your resume will be ready when you need to start looking for work.
“I network by meeting with colleagues and friends in my industry regularly,” Saavedra said. You can also try expanding your network and making new connections so you stand out when the time comes.
Pay off your high interest debt
If you’ve had trouble paying off high-interest debts like credit card debt, expert review board member and personal finance expert Jason Steele suggests reaching out to your credit card provider to discuss your options. They may be able to put you on a repayment plan, temporarily lower your interest rate, or give you a credit card deferment. You can also look into 0% balance transfer offers or debt consolidation loans to get rid of interest charges.
If you’re struggling to make your credit card payments, don’t wait for interest rate cuts, says Gerri Detweiler, an author and credit card expert. She also suggests consulting a professional, such as a certified debt relief specialist.
We recommend the National Foundation for Credit Counseling and the Financial Counseling Association of America. The Department of Justice website also has a list of approved credit counseling services in each state.
Take a long-term approach to investing
When stock prices are low, it may seem like the perfect time to change your portfolio. But it can be a slippery slope for investments you already have, and experts say it’s best to focus on long-term diversification rather than making knee-jerk reactions.
“When stock prices go down, you’re poorer, which is bad,” Fry said. But if the positive and negative effects balance out, he noted, your asset allocation is fine. Take time to review your risk tolerance and examine your investment goals.