Here's Why You Shouldn't Stop Investing if a Recession Hits in 2023

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  • If you lose your job in a recession, you should cover your near-term needs before worrying about investing for the long term.
  • If your finances don't take a hit during a recession, then it pays to keep investing.

It's important to stay the course.

Will a recession hit in 2023? Last year, many financial experts seemed convinced that the economy would tank this year. But recent data, like strong jobs numbers, seem to say otherwise.

In fact, JPMorgan CEO Jamie Dimon, who was very vocal about sounding recession warnings in 2022, recently told CNBC he's not as convinced that a near-term recession is about to hit.

"The U.S. economy right now is doing quite well," he said. "Consumers have a lot of money. They're spending it. Jobs are plentiful."

Of course, things could take a turn for the worse at some point in 2023. The Federal Reserve isn't done fighting inflation, and if the central bank keeps raising interest rates, consumer spending might wane in the wake of higher loan and credit card borrowing costs. And if spending declines enough, a recession could be the end result.

That might raise the question: Should you keep investing if a recession strikes the economy? Or should you hold off until things settle down? And the answer is, it depends on how you're specifically impacted by a recession.

When money gets tight

The scary thing about recessions is that they can lead to rampant job loss. If you were to lose your job in a recession, you might have to stop investing for a while to make sure your basic needs are covered in the absence of a paycheck.

Now ideally, you'd have cash in a savings account to tap in that situation, too. But it could be wise to cut back on investing, or stop completely, if you're pulling money from savings to pay for basic necessities.

When your job isn't affected

While a recession could lead to an uptick in unemployment, that doesn't necessarily mean you'll lose your job. And if you don't, and your finances aren't impacted, then there's no reason to stop investing.

The more time you give the money in your IRA or brokerage account to grow, the more wealth you stand to accumulate. So if you're able to keep pumping money into one of these accounts, it pays to do so.

Furthermore, while stock market dips and recessions don't always go hand in hand, they often do. And investing in a down market is actually a great way to grow wealth.

Let's say you normally buy two shares of a given company at $100 apiece each month. If the value of those shares drops to $80, you have a prime opportunity to scoop them up at a discount. And so if you have the money to invest, there's no reason not to.

We don't know what 2023 has in store for the U.S. economy. The general sentiment now seems to be more optimistic than it was during the latter half of 2022. But things could still take a turn for the worse. And if that happens, you should put your immediate needs before your investments. But if you're not hurt financially in any way by a recession, then there's no reason not to keep investing if that's something you're accustomed to doing.

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