The arrival of 2023 carried a big uncertainty for the US economy: the biggest question that investors, business owners, and people in general keep asking is: ¿are we in recession? Economists don’t fall into consensus about this topic, but, in general terms, they keep pushing their estimates on when the recession will hit the US. That’s because the economy has demonstrated to be more resilient than thought, through the first months of the year.
The main reason why economists expect a recession is because, over the past 14 months, the Federal Reserve has raised interest rates fastest than ever in 40 years, in order to bring down inflation. Historically, when that happens, buying a home, building a factory, or investing through credits becomes way more expensive. That reduces economic activity and there is where recession hits.
But, because of the pandemic, and people staying in their homes, Americans, in general terms, keep a big amount of savings, which was the key factor in fighting inflation and big interest rates. Also, the “return to normal” is reflected in the increasing demand for traveling, entertainment, and consuming practices in general. Actually, consumer spending jumped 0.5% in April, after adjusting for inflation.
All we have said until here, have helped to make employment stay stable. 283,000 jobs have been added on average from March through May. Nevertheless, most economists still believe there will be a recession in the second half of the year. This, of course, does not mean an absolute stop on dealmaking, but a clear focus on middle to small-size markets.
Mega deals and large deals were significantly down compared to past years, and more small, affordable, strategic deals have been preferred among investors. At Pacifica Advisors, we specialize in that sector. We can give you a free opinion of value and share with you our expertise through this full of opportunities landscape.