Image Source: Pixabay

So…

We’ve flirted with the financial implications of a recession for the better part of this year. With so many factors influencing inflation, stagnation, and economic uncertainty, it’s only natural the “R” word would come into the equation.

Thankfully, the American consumer has remained strong despite higher prices, pain at the pump, and market volatility. This, I believe, has carried us through spring of economic uncertainty.

But what about the summer?

With higher interest rates added to the mix, a recession seems much more likely – especially when previous efforts earlier this year haven’t made a dent in inflation. This is now making Americans begin tightening their belts, and the experts have taken notice.

The Wall Street Journal, for one, has been taking the temperature of top economists for years, looking for early signs of economic fluctuations. Yesterday, its pool of monetary masterminds handed down some rather concerning sentiments: 

“Economists surveyed have dramatically raised the probability of recession, now putting it at 44% in the next 12 months, a level usually seen only on the brink of or during actual recessions.

“The likelihood of a recession has increased rapidly this year as inflationary pressures remained strong and the Federal Reserve took increasingly aggressive action to tame them. Economists on average put the probability of the economy being in a recession sometime in the next 12 months at 28% in the Journal’s last survey in April and at 18% in January.”

At this rate, there will be a 60% chance of a recession in August – if we’re not there already by that time.

The Journal hardly ever sees such a high percentage without a recession to follow. For instance, in December 2007, its economists assigned a 38% likelihood of a recession. The next thing we knew, we were stuck in a downturn into 2009.

Not to be repetitive (or state the obnoxiously obvious), but there are numerous reasons why a recession is on so many minds. Perhaps the most damning evidence comes from the diminishing returns we’re seeing in the Fed’s efforts to hamper rising inflation. Even with interest rate increases of up to 0.75% these last few months…

Prices remain high, demand persists at surprisingly high levels, and we’re still grappling with the aftermath of stimulus cash.

On the plus side, they’re not necessarily predicting a bad recession. Forecasts have unemployment rising from 3.6% in May to 3.7% by year’s end. And consumers should continue funding the leisure and hospitality spaces this summer.

It’s just that, as interest rates continue increasing, spending power will eventually erode.
 

More Non-REIT News to Know About

In the last few months, it seems unionization is affecting more and more businesses. From Starbucks (SBUX) to Microsoft (MSFT), many of America’s top companies have been forced to succumb to their workers’ will.

Even the almighty Apple (APPL) now finds itself in the crosshairs of the coalition trend. Its first retail store, located outside of Baltimore, Maryland, just voted in favor of unionization. The so-called Apple Coalition of Organized Retail Employees voted to join the International Association of Machinists and Aerospace Workers (IAM).

This prompted IAM President Robert Martinez Jr. to:

“… applaud the courage displayed by CORE members at the Apple store in Towson for achieving this historic victory. They made a huge sacrifice for thousands of Apple employees across the nation who had all eyes on this election.”

“I ask Apple CEO Tim Cook to respect the election results and fast-track a first contract for the dedicated IAM CORE Apple employees in Towson. This victory shows the growing demand for unions at Apple stores and different industries across our nation.”

Something tells me Cook isn’t too thrilled about this development. Though perhaps he’ll graciously accept the defeat anyway.

We still don’t know since (at last check) Apple had yet to respond. But it will be interesting to see the company’s corporate reaction to such a bold move.
 

The World According to REITs 

While researching this weekend, I got a great reminder about why I do what I do. I couldn’t help but focus on why I became interested in real estate investment trusts (REITs) in the first place.

For one thing, I love the diverse nature of these assets – how they dip into so many market sectors while maintaining stability and consistent income. Whether they fall into the industrial, retail, healthcare, or hospitality (etc.) spaces, they can help boost your portfolio over time.

REITs are impressive at insulating your portfolio as the broader market shifts ever closer toward recession. That’s because they’re required to pay at least 90% of their income to shareholders via dividends, padding your portfolio with passive income despite price-point dips.

The best of the best keep those payouts steady even when their shares take a dive.

That’s nice to know since the market is going to do what the market is going to do. As investors, we only have so much control. However, with sound strategies, we can prepare in a way that brings peace of mind instead of panic.

As summer rolls on, one company that continues to catch my attention is VICI Properties (VICI). This gaming REIT owns the largest experiential real estate portfolio in the country thanks to top-notch casinos and resort holdings.

Currently, VICI operates 58,700 hotel rooms, 3.8 million square feet of gaming space, and over 50 entertainment venues across 43 properties. Plus, with a 75% adjusted funds from operations (AFFO) payout ratio to support dividends, its dividend seems safe.

Significantly so.

Right now, VICI’s share price is sitting under $29, which doesn’t reflect its future value.  This REIT has tremendous potential with an embedded growth pipeline and unique assets.

All told, it could be a stellar source of passive income this summer.