We’re already in a recession, according to the Fed’s GDP tracker

At the beginning of June, 55% of Americans believed that the U.S. was in an economic recession, according to a poll from The Economist and YouGov. While the U.S. wasn’t in a recession a month ago, we may be now, at least according to the latest reading from the Atlanta Fed GDPNow measure, a model from the Federal Reserve Bank of Atlanta that tracks U.S. economic activity, and projects GDP growth in real-time. The tracker now forecasts that the U.S. economy contracted by 1% during Q2, which would officially mark a recession, which is two straight quarters of negative GDP growth.

The Bureau of Economic Analysis will release its initial GDP estimate for Q2 on July 28, which is when we’ll know for sure whether the economy grew or, as now expected, contracted.

Given the pessimism around the economy, a recession wouldn’t be unexpected at this point. A confluence of factors has dragged the economy down and led to a high-inflation environment, which is currently hammering at many Americans’ finances. “It’s a perfect storm, with supply chains, interest rates, inflation, and the war in Ukraine—not to mention the pandemic,” says Judi Leahy, senior VP wealth management at Citi Global Wealth. The stock market, too, has taken its licks this year, and while Leahy says that there is still room for further drops, she does think that most of the damage is done.

“I think a lot of [the expectations of a recession] is baked in, but I think we might go a little bit lower in the market” in the months ahead, she says. During the first half of 2022, the S&P 500 fell more than 20% into a bear market—the worst beginning to a year in more than half a century, according to S&P Global Market Intelligence. If it’s any consolation for investors, historically, there’s been little or no correlation between the market’s performance during the first half of the year and the second half. So, it’s possible that the market could see a turnaround.

Yet, even if it does, many large companies, such as Meta, are also signaling that they’re preparing for a tough economic environment ahead. As first reported by Reuters, an internal memo circulated among Meta employees this week from chief product officer Chris Cox said that the company needed to batten down the hatches. “I have to underscore that we are in serious times here, and the headwinds are fierce. We need to execute flawlessly in an environment of slower growth, where teams should not expect vast influxes of new engineers and budgets,” the memo said.

As for what the average consumer or investor can do, Leahy suggests sticking to some age-old advice in the face of bear markets and recessions: Weather the storm because this, too, shall pass. “We’ve seen that, historically, the market will rebound. If you take your money out now, you’re booking a loss—but right now, it’s only a paper loss,” she says. 

“Remember to ask yourself: Where do you think the economy will be in three or five years?” Leahy adds. “There’s going to be another expansion down the road. It’s just a function of when.”