2023’s financial mantra: Keep calm and plan accordingly

By Chris Wolf

Are we in a recession? What’s going to happen with the markets and interest rates this year? Will our economy hold up? What should we do to maintain our company’s financial health?

As business leaders wrap up their 2023 planning, these questions have been frequent topics of discussion. No one can predict the future, of course, but decision makers may be able to better prepare for potential uncertainties and make decisions from a position of strength by considering these key factors.

A strong regional economy protects against recession

A positive indicator for the year ahead is the economic performance our region experienced in 2022. Despite global economic challenges, many businesses in our region had a solid year and most remained profitable. From a banking perspective, we’re seeing strong balance sheets and continued high levels of liquidity and deposits heading into 2023, which indicates strong overall economic health in our region.

The current strength of our regional economy will help cushion against potential recessionary impacts. The question of whether we are already in a recession or heading that way this year remains debatable, but we believe current conditions suggest a recession could take hold later this year. While “recession” is a dreaded word, our region historically fares better than most during recessions, as do other smaller economic areas with diverse industries throughout the Midwest. We aren’t as vulnerable to the dramatic economic highs or lows that impact large economies on the East and West Coasts, and current local economic indicators, such as sales tax revenue, low unemployment, and travel data, suggest our region will experience continued overall steady economic performance in 2023.

Expect rising interest rates

Rising interest rates were a cross to

Bear Throughout 2022 And We

expect that will continue in 2023. The Federal Reserve is projected to continue raising short-term interest rates as they seek to beat back inflation, and while we are beginning to see signs of inflation slowing, the extent of rate hikes this year remains to be seen and will depend on the Fed’s ongoing evaluation.

Federal rate increases mean short- and potentially long-term borrowing costs will rise in 2023. In a rising rate environment, busi- nesses planning capital expenditures this year are wise to lock in interest rates now. This will eliminate cost uncertainty and enable more accurate profitability forecasting. It is also a good time to evaluate cash flow plans with a financial advisor and review lines of credit to ensure there is sufficient capacity to meet the company’s anticipated needs.

Businesses entering 2023 with excess cash they are not planning to spend should explore options to increase returns. In an uncertain economic environment, it is smart business strategy to lean on the expertise of a financial advisor to help identify short-, mid-, and longer-term investment strategies that maximize yields until those funds are needed.

Competitive retirement and benefits win workforce

With sustained low unemployment, workforce recruitment and retention has been a hot button issue for some time in our region, and that will continue this year. A robust retirement and benefits package can contribute to a company’s success rate in attracting and retaining talent. Company leaders and human resources teams should review their packages to ensure they are providing competitive retirement savings plans and additional benefits, such as health savings accounts and flexible spending accounts, that empower their employees to plan and prepare for long-term financial wellness.

The recently enacted SECURE (Setting Every Community Up for Retirement Enhancement) Act 2.0 provides dozens of provisions that will impact employer plans and individuals beginning this year. After experiencing a pandemic and recent inflation, employees are more interested than ever in tools to help them prepare and save for the unexpected. Employers who can help them achieve those goals will gain a competitive edge in the workforce. A retirement plan advisor can help make sense of what is changing and where there may be opportunities to further enhance retirement and benefits offerings.

Thoughtful planning prevails

As we dive into a new year of uncertainty, challenges, and opportunities, it’s important to keep in mind that our region has a history of weathering economic fluctuations with relatively small impact. After an unusually long period of historically low interest rates a rising rate environment naturally sparks concern, but current rates are not abnormally high, historically speaking. And while recessions are challenging, they are not insurmountable. By taking an informed, thoughtful approach to financial planning, businesses will be better positioned to withstand and prevail in 2023.