If it looks like a recession, and sounds like a recession...

US prepares for possible recession 2:16

New York (CNN Business) --

Is an economic recession looming in the United States?

Or, are you already in one?

The answer is practically irrelevant.

For many Americans, it already looks like a recession.

Rising prices for almost everything make it harder to pay everyday expenses and monthly bills.

The stock market has tanked this year.

Home sales have started to fall.

Consumer confidence is low.

A recent Morning Consult/Politico poll showed that 65% of American voters said in mid-July that they believe we are in a recession....and that's compared to just 51% who said that in March 2020, the start of the covid outbreak and the start of the last recession.

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And according to a survey conducted last month by the Boston Consulting Group, nearly 80% of investors expect a US recession to start sometime within the next 12 months... and more than half of those surveyed they think it will start before the end of 2022.

So if you take perception to be reality, these numbers may matter as much or more than actual data on job growth and the economy in general.

"People are bracing for the fact that we're either in a recession now or there's a high probability that we'll be in one soon," said Hady Farag, partner and associate director of the Boston Consulting Group.

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The Federal Reserve will have to consider inflation fears as it tries to balance aggressive rate hikes with concerns that too much tightening will destroy growth.

The Federal Reserve is expected to raise rates this month by another three-quarters of a percentage point, following a similar move in June.

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"The word recession casts a shadow over the markets, but in a way, the only way out of this inflationary environment is for central banks to trigger this recession," Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers Solutions, said in an email. a report this month.

With this in mind, investors need to prepare for the recession that already appears to be underway, and policymakers need to prepare for slowing growth...or worse.

The US economy contracted in the first quarter and investors are eagerly awaiting Thursday's gross domestic product report to see if GDP contracted again in the second quarter.

Although two consecutive quarters of negative figures is what is commonly understood as a recession, that is not the official definition.

A group called the National Bureau of Economic Research (NBER) is in charge of officially declaring the start and end of economic downturns, and the NBER has tended to wait several months before making any decisions about the start of recessions. a recession

Treasury Secretary Janet Yellen said in an interview broadcast Sunday on NBC's "Meet the Press" that a recession is "a broad-based contraction in the economy that affects many sectors," adding that she would be "surprised "if the NBER said the economy is in a recession right now.

But there is likely to be a lot of recession talk this week if the second quarter GDP report disappoints.

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Not all recessions are the same

"Recession is not our base case. We continue to expect the economy to slow significantly but avoid a recession in 2022," Katie Nixon, chief investment officer at Northern Trust Wealth Management, said in a recent report.

She but she added that "the technical definition of a recession may still be met."

Farag of the Boston Consulting Group also noted that even if the economy has already entered a recession, that doesn't mean the downturn will be as long and painful as some previous recessions.

Farag said most investors don't seem to be expecting a repeat of the early 1980s or another Great Recession like the one in 2008.

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"No two recessions are the same. I don't think people are very worried about a big recession or a massive stagnation," he said.

It's also worth remembering that if there's a recession, the Fed could quickly reverse course and start cutting rates again to try and restart the economy.

That is exactly what the central bank did after a series of rate hikes in 1999 and early 2000, just as the dotcom bubble burst.

But once the economy entered a recession in 2001, the Fed cut rates 11 times that year.

Economic recession