In my opinion, World Economic Forum, Davos 2023, was centered around 

• Recession 
• Sustainability
• Blockchain
• Peace and Polarization of our world

I have attended a few private sessions on these topics and spoken to multiple people about these significant challenges with numerous people.

I will cover my understanding of recession based on my interpretation of the talk of Ana Botín, Executive Chairman of Banco Santander.

The possibility of a recession is looming on the horizon, and knowing how to prepare for it can be challenging. While experts have different predictions about what a recession may look like, individuals must take steps to protect themselves financially. Let’s discuss practical steps the average person, or “Joe,” can take to prepare for a potential recession. From building an emergency fund to keeping your skills updated, these tips can help you weather any economic downturns.

Inflation continues to be a significant concern for consumers as the probability of a recession looms on the horizon. However, experts believe this potential recession will differ from previous ones as countries like the UK, Spain, and Portugal have reported higher employment levels than ever before. The higher interest rates are causing stress on the economy and leading to less growth. Experts emphasize the situation’s structural nature rather than just a temporary setback.

In the UK, the energy crisis and the surge in mortgage rates have caused stress for many people. However, the demand for mortgages in the UK and Spain has been growing in the last six months, and this trend has now turned. As a result, fewer people can afford to buy a home, and there is less demand in the housing market. This is precisely what monetary policy is designed to achieve, as it is meant to curb aggregate demand.

Despite this, households in the UK, Spain, and Portugal are in a better situation than they were 15 years ago. The current net wealth of families in these countries is much higher, and affordability is better even with today’s interest rates.

Regarding the housing market, experts predict there will be more stress in North America than in the rest of the world. There will be adjustments in the housing market, but they are not expected to be as severe as last time. The housing market in Spain, Portugal, and the UK is much better than in the previous crisis.

In terms of the US and Europe, there has been a disconnect for a long time, with the US growing much faster than Europe. However, whether this is a structural reality or a temporary setback is still being determined. As experts mentioned, deploying capital in the US is a very different proposition than in Europe, and the situation needs to continue to be closely monitored.

My interpretations

It is difficult to predict the exact outcome of economic and housing market conditions over the next four years. However, based on the information provided in the talk, it is likely that:

1. The UK, Spain, and Portugal housing markets may experience some adjustments or corrections, but they are not expected to be as severe as they were during the last crisis.
2. The employment levels in these countries may continue to be high, indicating a different type of recession than in the past.
3. The demand for mortgages and loans may slow as interest rates increase, which could impact the housing market.
4. The energy crisis and rising mortgage rates may cause stress for some individuals and households in the UK. Still, these households’ overall net wealth and affordability may be better than 15 years ago. It is important to remember that these predictions are based on the information provided in the talk and that many other factors could influence the outcome.

What does it mean to you?

There are a few steps that the average person, or “Joe,” can take to prepare for a potential recession:

1. Build an emergency fund: It’s essential to have a savings cushion to fall back on in case of job loss or unexpected expenses. Aim to have at least three to six months’ worth of living expenses saved up in an easily accessible account.
2. Get out of debt: High debt levels can make a recession even harder to weather. Prioritize paying off high-interest debt, such as credit card balances and personal loans, as soon as possible.
3. Diversify investments: Diversifying your investment portfolio can help protect your savings from market fluctuations. Consider investing in a mix of stocks, bonds, and real estate to spread out risk.
4. Keep your skills updated: Keeping your skills and knowledge up to date can make you more marketable in case you need to find a new job.
5. Be mindful of your spending: Being conscious of your spending and living within your means can help you prepare for a potential recession. Avoid taking on unnecessary expenses and save as much as you can.

It’s important to remember that no one can predict the exact outcome of an economic recession. Still, by taking these steps, you can help protect yourself financially and be in a better position to weather any downturns.

Conclusion

In conclusion, the possibility of a recession is always a concern for consumers and businesses. However, experts believe this potential recession could be different from previous ones as countries like the UK, Spain, and Portugal have reported higher employment levels than ever before. Despite this, higher interest rates are causing stress on the economy and leading to less growth.

Individuals need to protect themselves financially to prepare for a potential recession. Building an emergency fund, paying off debt, diversifying investments, keeping skills updated, and being mindful of spending are all steps that can help one weather any economic downturn.

It’s important to remember that no one can predict the exact outcome of an economic recession. The information provided in this article is based on the author’s understanding and interpretation of the conversation and should not be considered financial advice. Always consult a financial advisor before making any financial decisions and conduct research.

Speaker

Ana Botín is the Executive Chairman of Banco Santander, one of the largest financial institutions in the world. With more than 25 years of experience in the banking and finance industry, Ms. Botín deeply understands the global economy and the potential impact of a recession. Under her leadership, Banco Santander has expanded its operations to over ten countries, and she is known for her strategic vision and ability to navigate complex economic situations.

I want to thank Ms. Botín for her valuable insights and candid conversation on inflation, recession, and the housing market. Her experience and expertise in the field have provided valuable information for readers to understand better and prepare for potential economic downturns.

Disclaimer

The information provided in this article is based on the author’s understanding and interpretation of the conversation and should not be considered financial advice. The predictions and suggestions do not endorse or guarantee any specific outcome. Readers should always research and consult a financial advisor before making financial decisions. Additionally, the views and opinions expressed in this article are not necessarily those of Ms. Ana Botín or Banco Santander.