September 2025
While no one can predict the next downturn, CEO Jeff Sarti and Modearn™ Advisor Beau Wirick break down practical steps to help you feel more confident no matter what the economy throws your way.
Tune in if you’re interested in…
• Knowing how a recession might impact you, depending on your life stage
• Learning the “three-bucket” approach to financial security
• Building a resilient investment strategy that prioritizes income
• Stress-testing your retirement plan for unexpected events
• Feeling more emotionally prepared for uncertainty
Watch previous episodes here:
Money & Marriage: Finding Alignment with Your Partner | Morton Wealth
3 Mistakes to Avoid if You’re Self-Employed | Morton Wealth
Today we're talking about how to prepare for recession, and I'm Beau Wirick, I'm here with CEO of Morton Wealth, Jeff Sarti. Wow, I'm nervous.
It's great to be here with you Beau. I'm nervous too.
As you should be. I mean, it is me, after all. So we are talking about how to prepare for a recession. And one of the things that I think is true is that the way that people look forward to a potential upcoming recession has a lot to do with their experience in the past recession, or lack thereof. And one of the things that we talk about a lot is people who are on the younger side maybe weren't even adults the last time we had a recession in 2008.
Right?
They've never experienced it before. And so their view of what the next recession looks like is kind of nonexistent.
Yeah. They can't even imagine it.
Right, right. They dont have the experience. Whereas for me, I was graduating from college in 2008 and I couldn't find a job. I couldn't get an interview.
This was this was like May of 2008?
May of 2008, I graduated college. I'll never forget the feeling of not being able to find work. It's it's embedded in my brain and it's affected me to be a much more cautious investor, a much more risk averse person because of those memories. And so I see that all the time is like, oh, when's the next recession around the corner? I'm one of those people, right?
Whereas there's a lot of people who are saying, oh, it's never going to happen again. And things have changed.
It surprised me, though, because you're such an optimistic glass half full type of person.
Yeah,
But still, I guess it affected you to that degree and it's compensating. Yeah. So you started your career right before the dot.com recession. What was that experience like?
Yeah, it started in financial services in 1999 as the market was just ripping up dot.com stocks. And then on the heels of that, just a year later, the bust of of the.com stocks on the Nasdaq, you know falling 80%.
So speaking of people not remembering the last recession, that's like two recessions ago. That's ancient history.
It feels like a distant memory. It was very visceral for me at the time and definitely affected my thoughts of booms and busts and how to prepare for them. But I think what shaped me even more was similar you. It's really the 2008 recession. I, started a hedge fund with a partner in January 1st of 2008.
What timing
Kind of crazy timing, but in many ways, for me personally, from a learning experience, it was really fortunate because I was fortunate enough to partner with my partner at the time, who I'm still very close with, really a brilliant thinker, very contrarian in his approach and not contrarian for contrarian stake, but really just a very independent thinker who was able to see the forest through the trees and what he saw. He didn't have a crystal ball, but he saw tremendous imbalances out in the system, namely with regards to housing, and had a conviction that we had to protect portfolios against those imbalances. And it was through that experience that it just really just shaped my thinking around risk management.
Again, not predicting when a recession will come, but looking at the imbalances and protecting in that, protecting against those imbalances ahead of the fact, make me, think differently about diversification, really incorporating assets that will not be driven by economic growth or GDP. A lot of our thoughts around gold came through that time period, which I'm sure we'll talk more about as well.
So a real to your point really shaped my view of how to, protect against recessions just because of that experience that I live through.
Yeah. It's interesting you were you can't predict when a recession is going to happen. You can prepare for it. You just so happen to have the timing pretty right on in 2008. And so there was there's a lot of people will say like, oh, no one could have seen this coming.
It's like, well, you kind of could have seen it coming, but getting the exact timing right. Like the Big Short guy, he started shorting in 2005 and it was like it was a little early. So looking back at the last recession, can oftentimes give us an impulse of what the next recession is going to be like. But what we know from history is it's usually the next recession isn't like,
yeah,it might be like a handshake.
Right. Exactly. So preparing for yesterday's war might not really when you next the next one.
I love that you say that because the real the last real nasty recession was 2008. And 2008 really changed things in terms of now, the next recession when it comes, will look different than that previous one. And I think a big part of it is because we are now in such a world, a financialized world. And what I mean by that is 2008 change everything and the government came in to save the system was 0% interest rates, money printing galore. Especially now in recent years, the debt binge with each passing year always to paper. Paper over the problem. The government at large. And this isn't just in the US, but even around the globe, really does, is frightened of recessions and is frightened of economic cyclicality.
So they'll do everything they can to stimulate the economy to protect against those downturns, if you will. So that's all well and good. But the problem is by saving the system over and over, you don't have that nasty downturns and you create larger imbalances and would have otherwise exists. I think maybe a simple analogy is to think through like a forest fire.
And really unfortunate timing here. Talking about a forest fire, which just happened in Southern California. But it is sort of enlightening when you think about protecting against fires. Ideally, there are small fires along the way. You clear the brush to prevent against that otherwise ultimately very disastrous fire. We have not allowed for the small little brush fires, clearing of the forest, if you will, to protect against the ultimate calamity of that large forest fire that potentially now is coming down the road.
The longer that you put it off, the worse the resulting recession might be.
Yes, exactly. It's those imbalances that you have to ultimately let a bit of a little bit of air out of the balloon at certain points, or ultimately that balloon will just keep getting bigger and bigger and ultimately pop.
Okay, so not to say that we're predicting a recession or that we know when the next recession is going to happen, but if you were to say there's a bunch of red flags that you're seeing, and when the next recession happens, it's going to be those red flags that people like, oh, we should have seen it coming.
What are you seeing around? Like the economic ecosystem that is concerning you?
Yeah, there's a number of things that we're looking at, and I think I would point to four main topics. One is the job market always looking at the job market and the health of the underlying American consumer, interest rates, our interest rates going to go up or down, housing market, especially as housing prices have gone up in value, that housing really drives the economy to a large degree.
And then lastly, which is really top of mind right now, are tariffs. The uncertainty around tariffs in particular. So those are those are the four main things that I think we're looking at more than anything else.
Yeah. Job market makes sense. It's it's kind of hard to have a recession if everybody's employed. And just spending their money. And I remember in 2022 there were a lot of people saying there's going to be a recession and we're going into recession.
The stock market was correcting, the fed was raising interest rates. Inflation was high. But the people who were saying, no, no, no, there's not going to be a recession. We're pointing to the job market. Yeah, everybody could get a job. People were leaving their jobs and getting big raises during 2022. So how does the job market cause a recession or prelude it.
As a starting point, consumers are 70% of the underlying economy in the United States. So as go the employed individuals, so goes the economy. If you have a recession and people out of work, people will not spend money as much. And you could that could really be a snowball effect and trigger a recession. One other aspect is how people invest and what's really newer in the last call, it 15–20 years is the advent of the 401 K, the retirement plan, where on a systematic to some degree, even mindless fashion, every two weeks when someone gets their paycheck, they automatically have a certain amount in their money deposited into their 401K plan.
And what happens? You buy stocks, right? Again in a very systematic way. That regular purchasing power of stocks. And again I say mindless. This is a wonderful advent. People are saving for their retirement. So it's great. But again it's just done in a systematic way no matter what the environment is. And so that results in underlying demand for stocks.
If that shifts, if people suddenly are not working as much, lead out of work, not contributing to their 401k if anything, even withdrawing from their 401K all of a sudden that can result in more sellers of stocks than buyers, and that can really have a domino effect.
Yeah, I guess the the balance between sellers and buyers is very related with the price of stocks. It's like selling anything. If I have a hamburger shop, and you know, if people are lined up out the door to buy my hamburgers, I can keep the price of my hamburgers pretty high. And that's like people with their 401 K is every two weeks. They're buying, buying, buying stocks. But if people stopped being employed at the same rate, they're not lined out the door to buy my proverbial hamburgers. I would have to lower the price of the hamburgers in order to sell them. Same with stocks.
It's a great analogy. Yeah.
And so and so we could see if the if people are not as employed, there's not gonna be as much purchasing power or purchasing pressure on stocks.
One last point on that demographics. More and more baby boomers are retiring as well. So you have that shift where baby boomers leaving the workforce and no longer contributing and in fact, now starting to live off their savings. So that's another headwind we had when we potentially faced down the road, right.
Not only baby boomers retiring, I think it's like 10,000 baby boomers a day retiring, but they have the vast majority of the wealth in this country. And so if they're the ones who are withdrawing from their 401 K's, selling stocks, taking their RMDs, then you could arguably see some selling pressure on the stock market at that point. Okay, so the second thing you mentioned was interest rates. How are interest rates concerning you right now? What could you see them as playing a role in causing the next recession?
Interest rates are very dependent on the job market. So even going back to the job market, what's happened in recent months is the data has really deteriorated as we're recording this in early September, just last week, the August numbers came out for unemployment. Very poor. July numbers before that a month ago were very poor. Then during that July report, revisions to June and May, I believe were pretty alarming. I mean, so four months in a row of bad data.
And in this last revision, the June numbers actually went negative. And that's the first time that's happened since COVID.
Right.
And so that kind of freaked out the markets a little bit — at least the bond market.
So now bringing that back to interest rates — the central bank led by Jerome Powell. What are they looking at? And about a couple of weeks ago he made his yearly speech at Jackson Hole. And he basically telegraphed that they are going to lower rates in their upcoming meeting in September. And the main reason why — it’s because of the job market. He's always balancing job market versus inflation. That's always the dual mandate and balancing those two risks, which is he more focused on currently. And he made it very clear he's more focused on the job market because he's seen deterioration. So that is one of the signs we are now looking at. Interest rates are telling you something, especially the Federal Reserve — the short-term interest rate — they're looking to lower interest rates to try to stimulate the economy because they're concerned that there's a slowdown coming.
You do see that if you look at the charts of the last recessions, it usually is corresponding with a severe drop in the Federal Reserve's interest rates. Right. Okay. And so then interest rates are obviously very tied with housing, which is the next point that you brought up. And I hear from real estate agents all the time:
“Oh man. The Fed's going to lower interest rates. You got to buy a house right now.”
Exactly.
How does this relate with the economy and recession?
So I'm glad you brought it to housing because obviously what drives housing so much are mortgage rates, which are longer-term interest rates. Short-term interest rates and long-term interest rates. Sometimes they're tied closely together, but that's not always the case. The Federal Reserve controls short-term interest rates and investors in the media at large are thinking that, okay, because the Federal Reserve lowers short-term rates, the long-term interest rate will follow and mortgage rates will come down.
Because mortgage rates are closely tied to, say, the 10-year Treasury yield.
Correct. The longer-term Treasury yield. But that's not necessarily the case. This comes back to — we mentioned it quickly — inflationary pressures. We happen to be in an environment very different than from 2008 through 2020, which was a lower inflationary environment. In that environment, every time they lowered short-term interest rates, longer-term rates fell. And that's why mortgage rates, you could get a mortgage in the 2 to 3% range.
Inflation, though, changes everything. The risk is if they do lower interest rates and lower them too much, long-term rates, instead of lowering, might actually stay elevated or even spike in value. That would obviously be challenging for the home market because instead of mortgage rates and your regular monthly mortgage bill going down, it might go up, which could be a headwind for housing prices.
Yeah. So you could see — I think we saw this happen in, in some way back in September 2024. Yeah. Last year. Exactly. They started lowering interest rates — they being the Fed. Yeah. And everybody said, “Oh, they're lowering interest rates, so therefore mortgage rates are coming down.” But over the next six months mortgage rates went up by a full percent.
And so we saw that happen — was completely against expectations. What can happen about housing prices going down at the same time that interest rates go down? Because oftentimes we hear, “Oh, the Fed is going to lower interest rates, housing prices are going to go up,” because interest rates are going to come down. There's usually a correlation there. Lower interest rates, higher housing prices.
So there are two reasons that potentially lower interest rates might result in lower housing prices. The one we quickly hit on is again, if they lower rates and the long-term rate goes up, mortgage rates could go higher. That can hurt or be a headwind for housing prices. The second thing, though, is supply and demand.
Many potential sellers of homes have been waiting on the sidelines because they're waiting and hoping for exactly what you alluded to. Once interest rates are lower, they're going to be more buyers in the market, and I'll wait to list my home at that time. So there's a tremendous amount of pent-up supply where the concern is when the Federal Reserve does lower interest rates in the coming months, all of a sudden there's going to be an onslaught of homes hitting the market — again, an onslaught of supply.
Now, I mean, almost taking it back to your hamburger analogy. Right now, you have a ton of homes hitting the market. Too much supply, not enough demand. That might actually make home prices go down because of that supply-demand imbalance.
I'm not only selling hamburgers, my neighbor's selling their hamburgers and their neighbor's selling hamburgers.
Totally.
Nobody's buying our hamburgers.
That's it. That's it.
And so you see, here's you being a contrarian, like you said. You hear the narrative saying that once interest rates fall, buyers are going to flood the market. And what you're saying is actually when interest rates fall — or if they do — sellers could flood the market. You could actually see an oversupply of housing.
And I think we're starting to see that shift. At least where we live, a lot of price cuts are happening. Sellers are having to lower the price of their homes in order to find buyers. Right now, they're blaming it on interest rates. But what lower interest rates could do is just bring more sellers to the market, which could exacerbate the problem.
Right. This is really complicated. The only thing we do know is the Federal Reserve is going — likely going — to lower the short-term rate. What happens to the long-term rate, will that go down or up? We really don't know. Then in addition, will sellers — depending on that long-term rate — will sellers overwhelm and flood the market, or will buyers overwhelm and flood the market? And what's that balance between supply and demand? We honestly, we just don't know at this time.
And it probably is multivariate. There's probably a lot to do with: what's the employment numbers? If you want to buy a house, but you lost your job — sorry, you're not going to be able to buy that house.
Yeah.
And so the last thing on the housing market — there's a lot of correlation between home value and the economy at large. Why is that?
I mean, housing is just — it's gone up so much in value. I don't have the stats on this, but they represent typically a very large percentage of families’ net worth. So if your asset goes down in value, even if you're employed, that could be concerning. You might go out to dinner less. You have less ability to borrow. You know, people — a lot of what's been funding construction projects and home, other expenditures — people taking out home equity lines.
You can't really do that as easily if your home value goes down. So, goes the value of your home, so goes the health of your pocketbook, if you will.
Yeah. There's a psychological element to it: “I don't feel as wealthy as I was.” And then there's also just a mathematical element: “Oh, I have less to borrow against my house in home equity,” and maybe interest rates are too high. I don’t really want to. And that can kind of contract the economy.
Yeah.
Okay, so we've covered the big three: jobs, interest rates, housing. Dark horse variable is this whole tariff situation. So not that you have a crystal ball, but how do you see tariffs affecting the possibility of a recession?
The main thing is tremendous uncertainty around tariffs. And uncertainty is never good for corporate America. So that's just concerning — that because of that uncertainty, there could be slowdowns with regards to companies at large.
The main ways that that shows or manifests itself — the first one is around behavior of purchasing power on the part of companies. If you think about a company that's looking to build its inventory, are they going to buy the good now, or are they going to wait three months down the road when that price is higher and that inflation has already hit?
So what's happened — and it's not surprising — they've bought that inventory to a tremendous degree. Now they've front-loaded, if you will, that inventory that they would purchase three, six months down the road. That resulted in really, actually pretty strong economic numbers in recent months because of that activity.
But the fear is that the next 3 to 6 months, the inventory that they would have purchased, the economic activity that we would have seen in the data — we're not going to see it.
I mean, I did that myself. I went and purchased a Japanese vehicle right before the tariffs hit because I needed to get it while the getting was good. And so, you know, whether or not that was the right decision, I don't know, but I was part of that trend.
Right. Right. Yeah. You got ahead of that upcoming price hike.
Exactly. And I'm not buying a car in six months.
Right. Exactly. But three months ago. So that means the upcoming data might be a little bit slower than it otherwise would have been.
Another aspect is in terms of corporate planning. So, one example is I'm part of a networking group, group of CEOs in different industries. And a CEO was talking — he manages products around the globe, has manufacturing plants around the globe. And he was ready to start the process of building a factory in Malaysia just a few months ago.
Completely put it on hold. He has no idea what the ultimate policies with regards to tariff rates in Malaysia will be. He's thinking, should I shift that plan to somewhere else? Should it go to Mexico? Should he even onshore that to the United States? He doesn't know yet. Ultimately, he will move forward with some plan of action, but he's just on hold, which results in stagnation.
And that company is now not spending the money that it otherwise was going to do.
That's right. And we see the current administration is trying to mitigate against this with the new tax bill that's encouraging a lot of domestic manufacturing and that kind of — so something will get offset. But it's really hard to fight against stagnation. You know, if people are not doing anything, that’s really how recessions can happen — if there’s not a lot of capital expenditure.
Okay. So we see kind of these four red flags: the job market, interest rates, housing, and tariffs. What are you doing as a CEO of Morton Wealth — as a portfolio designer — what are you doing to protect our clients against the possibility of recession, seeing these red flags out there?
It’s a few things. One is it's really obviously always focusing on — we talk about true diversification — being in lots of different asset classes that will just behave differently than one another, and ideally having a good amount of those assets that will be more resilient or less impacted by economic growth or recession. That’s a starting point.
A second aspect — we hit on it quickly in the intro — is gold. Gold has been a long-standing asset class in our portfolios. And it’s not because we have the ability to have a crystal ball or predict when that turmoil or recession is coming, but you should still have insurance, just like earthquake or fire insurance.
You don’t know when that fire or earthquake’s happening, but you still buy that insurance for that ultimate troubled time. So that’s gold. Gold is a more resilient asset class in times of turmoil, in times of recession. Gold doesn’t necessarily perform well in all recessions — I don’t want to overpromise — but specifically our concerns around upcoming imbalances, namely around interest rates, money printing, the debt levels we’re seeing, concerns around the dollar — we think gold can potentially be a strong performer, as it has been, in that potential upcoming recession.
Well, and you mentioned this, you kind of alluded to the financialization in the post-2008 world and how governments have become so much of a bigger player in the economic activity. If you just look at the components of GDP, government spending continues to get larger and larger as a percentage of that.
And so at some point, logically, it intuitively makes sense that the price of gold is going to adjust to just the printing press of money. And we're starting to see that play out, we think.
Yeah
As the price of gold is just skyrocketing right now.
Yep.
And it's kind of like, well, we know that when the next recession hits, the printing presses are just going to come on in full force — it's kind of just conventional wisdom. And so that makes a lot of sense with gold. And that alludes to also how you can't use the last recession to predict the next recession.
So just to kind of dovetail here, if that's the case — if the next recession hits and the governments around the world just print like nobody has seen them print before — what kind of recession would you imagine seeing at that point?
It's why continued inflationary concerns are top of mind. Many previous recessions were more deflationary in nature — slowdowns. But we know — I mean, the playbook is already out there, really going back to 2008, not just here in the U.S., but around the globe.
They will lower interest rates, they will likely print money, issue more debt. And we think that kind of creates a floor under inflation. And inflationary pressures will continue to persist even in a slowdown.
That's really counterintuitive. Usually, you don't associate inflation with recessions, but we think inflationary pressures will continue. And that's the reason why we also are so passionate about assets.
When we talk to you, as you know, we do so much in the way of lending. But our focus on lending is lending against assets as opposed to company cash flow. Why are we typically underweight or avoid company cash flow when we're making loans? It's because cash flow is going to be very cyclical and obviously go up and down with the direction of the economy.
That's not really protecting against a recession — very different when you're lending on illiquid assets, things like inventory, things like a trucking fleet. As long as there's a big margin of safety in terms of the loan to the ultimate value that you're lending against, that real asset will have value — potentially will even increase in value because of inflation.
So you're lending on an asset that's increasing in value. So that's a big, big selling point for us as we're looking to protect portfolios.
If the asset that you're lending against is, say, a house — more dollars chasing the same number of houses just makes the price of that house go up. And so we could see a world where there's a massive inflationary shock.
Yep.
And that's the style of recession that we see. I guess the closest thing in recent memory would be like 1970.
Exactly. That's a perfect example.
You saw the stock market do literally just nothing for about ten, 14 years, whereas inflation was double digits the entire time. So you lost a lot of purchasing power being in the stock market.
But you did well if you were invested or lent against real assets and gold — the typical resilient asset class. Bonds — flight to safety and treasury bonds — that’s what people generally think of in terms of safe haven assets, did very poorly in the 1970s as interest rates were rising.
So again, if the upcoming recession looks more like an inflationary 1970s-style recession, we're incorporating asset classes and hopefully should be resilient in the face of that.
I love it. You're kind of positioning us for — it could go right, it could go left, it could go down the middle. We don't know. It could just keep on going. We could just keep on having a roaring economy for the next three or four or five years. We have no idea what's going to happen.
Okay. Well, I think we've gotten to this or that.
Okay. Let's do it.
Jeff, I think we've established that we're the cool kids, this lunch table that's talking about all this macroeconomic stuff. Yeah. So as as the cool kids. Yeah. Here's the this or that question for you. Is the fed going to lower interest rates this year or are they going to head fake us and actually find a reason to raise interest rates.
Such a cool question. I really I know, I know, they are they're definitely going to lower rates. That's not surprising come September. But I think the more interesting question is will they lower rates in the October, November, December time frame? My crystal ball. You know me. I hate crystal balls. But if I had to guess, I'll say yes.
I think they're going to continue to lower interest rates. Both the Federal Reserve and Trump and President Trump are so wired, towards stimulus, they want a juicy economy. Jerome Powell, he's going to be done in May. He cares about his legacy. The last thing he wants is to raise rates and break the economy. They're just it's in their DNA to again be accommodative, dovish, stimulate the economy.
So I'm going to say lower rates okay.
Not contrarian. Look at you.
All right. Housing. We talk about housing. So similarly what do you think housing prices let's say in the next 12 months. Are they going to go up or down from here?
I think short term it's really hard to say. I think structurally housing prices do have to come down at some point. Just because the cost of purchasing a home is so high relative to the median income in every in every place you're talking about. If the affordability is off the charts and so it does have to come down, or interest rates would have to come down drastically. And so I think that I think that a small correction in the housing market is underway, and I think the next 12 months is going to continue to see a small correction.
I agree with you.
Oh, wow. Okay. Cool kids. Let's let's keep this going. Another this or that for you. Now this is the big one okay. Is a recession going to happen in the next 12 months?
The topic of of this discussion.
They've been waiting. They've been waiting to hear your prediction this whole time, despite all of these concerns that we're raising my answers now, real answers no.
Yeah. Wow.
There are a lot of concerns about the potential slowdown in the economy for reasons we talked about. But again, we've talked about this world we've lived in for literally the last call it 15 years since 2008. This financialized economy, where the government just wields its heavy hand, if you will, they at at the sign of any problem they are going to come in and come in hot and heavy.
They're going to lower rates, potentially print money if they have to on the fiscal side, you know, continue to increase debt levels, and support the economy. So I think and by the way, long term, going back to the forest fire analogy, I think that that's a problem. I think that'll create larger imbalances over time. But at least over the short term, that stimulus is very powerful.
And so I'd say no recession.
One more steroid induced sugar high.
Exactly.
Mixing my metaphors, but one more, you know, wrap up before before a catastrophic potential recession.
That's my best guess.
Interesting. I'm on the other side of the coin only because, and this is the nerdiest thing I could possibly say, but the inverted yield curve, I have to say it, the inverted yield curve.
You said we were the cool guys.
We're not the cool guys. Everybody knows that the inverted yield curve, once it normalizes, it usually precedes a recession.
You just officially lost the audience. You talked about the inverted yield curve.
Thank you so much again for joining us. We really do appreciate you kind of stepping in and having this conversation with us. If you wouldn't mind putting in the comments what you think. Do you think a recession is coming? Do you think interest rates are going up and down? What do you think is happening in the housing market? We want to keep the couch side conversation going, so join us in it.
Wow.
Disclosures: The information presented herein is for educational purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation and should not be relied on as financial, legal or tax advice. It should not be assumed that Morton will make recommendations in the future that are consistent with the views expressed herein. Past performance is no guarantee of future results. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.
