The term “Trumpcession” has been making headlines this week as economists and market watchers discuss whether President Trump’s economic policies could lead to a downturn. However, are we currently in a recession? Not technically – not yet, at least.
Economists typically identify a recession as two consecutive quarters of negative gross domestic product (GDP) growth. Although the U.S. economy shrank by 0.3% in the first quarter of 2025, most experts agree that the trend needs to persist before a recession is officially declared.
Waiting for official confirmation before taking steps to protect your finances is not a wise financial strategy. As a certified financial planner, I have witnessed how early preparation can impact financial decisions during economic uncertainty. So, if you’re wondering how to safeguard your money, here is what you should know.
Is a “Trumpcession” imminent?
Currently, no one can say for certain. While there have been some positive economic signs, such as the robust jobs report in April, other indicators paint a less optimistic picture. For instance, the likelihood of the U.S. economy entering a recession by March 2026 has climbed to 36%, up from 26% in the fourth quarter of 2024, according to Bankrate’s latest Economic Indicator Poll. Consumer sentiment has also dropped to its lowest level since the COVID-19 pandemic, according to the University of Michigan consumer sentiment index.
The prevailing economic unease largely stems from the administration’s aggressive trade policies implemented in April 2025. These policies include a base 10% tariff on imports from all nations, with higher rates for countries where the U.S. maintains substantial trade deficits.
Should you be worried about bank stability?
Amid economic uncertainty, your funds in the bank are secure. Deposits in Federal Deposit Insurance Corp. (FDIC)-insured banks or National Credit Union Administration (NCUA)-insured credit unions are safeguarded up to $250,000 per depositor, per institution, and per ownership category.
The primary concern lies not in bank security but in the potential reduction in returns. During economic downturns, interest rates often decline as the Federal Reserve endeavors to stimulate spending. This can result in decreased returns on savings accounts, certificates of deposits (CDs), and money market accounts. Individuals who rely on interest income may be particularly affected.
Immediate banking actions to consider
1. Diversify your accounts
View your funds like a sports team – you need players with various strengths. Instead of consolidating everything in a single account, contemplate distributing your money across the following options:
– High-yield savings accounts: Online banks typically offer better rates as they have lower operational costs. Even when rates decrease, they usually outperform traditional banks. Therefore, if your money is in a low-yield account, you might be missing out on significant interest earnings.
– CD ladders: If you anticipate further rate decreases, secure today’s competitive rates by investing in a certificate of deposit.
Part of your emergency fund should be kept untouched but accessible for occasional needs. Here are some tips to strengthen your emergency fund during uncertain times:
1. Increase your emergency fund: Instead of the usual recommendation of three to six months’ worth of essential expenses, consider saving more if your industry is prone to economic fluctuations, if your household relies on one income, if your income varies, or if you are self-employed or own a small business. Prioritize accessibility over high returns for this fund to ensure security.
2. Avoid risky investments: When bank rates drop, resist the temptation to chase higher returns in non-federally insured investments that could potentially lead to loss of principal. Remember that your emergency fund is not meant for aggressive growth.
3. Strategize your debt management: In times of economic uncertainty, consider refinancing fixed-rate loans promptly instead of waiting for rates to decrease further. Be cautious about variable-rate loans, as rates usually hit bottom during recessions and rise during recovery. Focus on paying off high-interest debt, such as credit cards, to save on interest costs.
Overall, stay calm amid alarming news headlines and remember that economic cycles are part of the norm. Rather than trying to predict economic trends, focus on preparing your finances to withstand any situation that may arise.
