Jacksonville, FL — It's time to be cautious-- it's the warning from WOKV's Consumer Warrior Clark Howard following a rocky day on Wall Street and the Treasury bond market flashing a warning about a possible recession for the first time since 2007.
Howard says that warning is called an inverted yield curve, which predicts a recession about 50%.
"What an inverted yield curve means is pretty simple. Long-term interest rates go below short term. Historically, that is a strong signal that a recession could happen, typically, within 18 months," explains Howard.
While it's far from a certainty, Howard says we should all take it as a warning.
"The economy, definitely, is flashing signals to us that we need to be careful, because there are things that we can't control, so we have to focus on what we can control. And that's how we handle our wallet," says Howard.
He says this includes paying down any debt you may have and building up your savings as much as possible.
In terms of your 401K, Howard says it depends on your age.
"If you're putting money in a 401K plan at work, the younger you are, the more irrelevant this is. You just stay at it, keep putting that money in. It's odd, but declines in the market now when you're young, make you more money later on in life. Anybody under age 45, this is just noise, and just ignore the declines in the market," says Howard.
But, if you're close to needing money, Howard says you need to make sure you have the right mix of investments, so that you don't put yourself in danger.