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The U.S. economic outlook is bleak—but just how bad is it going to get? In the three trading days since President Donald Trump announced his “Liberation Day” tariff regime, the S&P 500 fell 11 percent and J.P. Morgan put the odds of a U.S. and global recession at 60 percent, while Goldman Sachs raised its odds to 45 percent this week. (The only reason the numbers aren’t higher is these banks aren’t sure whether to believe Trump—if he really follows through on his 185-front trade war, they argue, the chance of a recession will become significantly higher.)
What can Americans do now if a recession is truly around the corner? Build up a buffer.
Of course, the best advice is personal. How to prepare for a recession depends on how well you were doing before Liberation Day. If you’re on the younger side and doing all right financially, avert your eyes and try not to freak out. Your 401(k)? “Don’t even look,” Mark Zandi, the chief economist at Moody’s Analytics, told me. “If you’re able to save, save.” Recessions come with a higher chance of losing your job or getting your pay or hours cut.
“Cut back spending as much as you can, cut back on luxuries, and try and see out the craziness,” the economist David Blanchflower told me. If you have low savings, such that you couldn’t “deal with a $1,000 exigency,” Blanchflower added, you might want to “put off necessities.” This might include home or car maintenance, or a nonurgent dentist appointment.
The older you are, and the more likely you are to get laid off, the more important it is to have liquid savings. (Of course, people don’t always see job loss coming, even in economically uncertain times.) “Having access to that cash—to that capital—can be really, really helpful,” Cory Stahle, an economist at the job-posting site Indeed, told me. Savings you can actually use, he explained, are better in tough times.
And for retirees on the eve of a potential recession, Zandi cautioned, it may be a good time to double-check that you’re not taking on too much risk. “Think about your broader savings and make sure that it’s consistent with your goals and your risk tolerance, and if you’re fortunate enough to have an investment manager, it’s probably a good time to check in with them,” Zandi told me.
If you really do have the money to spare—meaning, you have more than just rainy-day savings—consider buying assets. Trump could still change his mind and avoid the worst outcomes, and nobody knows exactly where the bottom of this stock market lies. “If you’re very wealthy, if you’re in the top 20 percent of the distribution,” Zandi explained, “you can be thinking more opportunistically about investing.”
Yet if everybody but the affluent puts off their purchases, cuts back on luxuries, and saves as much as possible, a recession will be guaranteed. That’s not unlikely—people act with their own best interests in mind, not with the expectation that they can save the macroeconomy. “There’s a paradox,” Adam Ozimek, the chief economist at the Economic Innovation Group, told me. “If everyone tries to save at the same time, that’s obviously one of the ways that a recession can happen,” he explained. “A recession can be a self-fulfilling prophecy.”
Eventually, enough people hunkering down sends a signal that gets picked up, if not by politicians, then at least by central bankers at the Federal Reserve and its equivalents around the world, who will cut interest rates to spur businesses and consumers to spend once again. This is when the stock market and the economy tend to turn around, Blanchflower told me, but government spending is usually part of the equation too. On that front, “nobody should have any faith,” he said.
Should tariffs rise to the degree that Trump promised, many Americans will find themselves saving as well as deferring their purchases. When the economy contracts as a result, all we can hope for is that government leaders have a desire to intervene to improve conditions. If not, a huge number of Americans will indeed find that a kind of liberation awaits them: unemployment.
