Recessions & Stock Markets
I’ve written about this a few other times this year, but the question keeps coming up in client meetings. Namely, are we in a recession? If not, will we go into a recession in 2023?
The short answer is that we don’t know. However, the Houston Astros beat the Philadelphia Phillies to win the World Series, pushing the most reliable recession indicator we have (a Philly-based team won in 1929, 1930, 1980, and 2008) off for at least a year.
But even if I had a crystal ball that told me we’d still have a recession despite the Astros’ victory, I’m not sure that information would give us a trading advantage. As shown in the chart above, markets typically go down before a recession starts and go back up before it ends. And just as importantly, there have been numerous occasions (1990, 81, 80, 60, 53, 48, & 45) when the stock market experienced terrific returns in the middle of an economic recession.
In other words, knowing whether we are in, or will be in, a recession wouldn’t tell me anything about future stock returns. The markets can go higher either way and trying to time the bottom never works. Given these historical data points, the only reasonable way I know to trade this would be to stay course on your existing financial plan and keep cheering for the Astros.
When it comes to writing about investments, the disclaimers are important. Past performance is not indicative of future returns, my opinions are not necessarily those of TSA Wealth Management and this is not intended to be personalized legal, accounting, or tax advice etc.
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