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THE 2025 RECESSION:
Even though this is defined as “two consecutive quarters of declining GDP” – more than likely, you won’t know you’re in a recession until it’s already too late. Throughout the last 6 recessions that have been confirmed, there is an average lag time of 7.3 MONTHS between the time a recession takes place and the time it’s actually announced. This means, if we’re in a recession right now, the “mainstream media” won’t be telling you about it until November.
For a recession to be “Confirmed,” it needs to be announced by The National Bureau of Economic Research who wants to see “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”
This is why you have investment banks, like Goldman Sachs, issuing their warnings – ahead of time – saying that they might see a recession on the horizon, which “reflects their lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies.”
Facts: Since the 1940’s, we’ve seen 12 recessions – the longest lasting 18 months, the shortest being 2 months during the 2020 shutdown – and, since 1900, the average recession tends to last about 10 months.
THE STOCK MARKET:
During the past 11 recessions, it was found that “Stocks have tended to peak eight months prior to a recession and declined by approximately 30%, on average.” From 1869 to 2018, there have been a total of 16 recessions that had POSITIVE stock market returns – and of those positive recessions, the market went UP by an average of 9.8%, during a time that GDP declined by 3%. This means half had no correlation whatsoever with lower stock values. Even when you include the 2020 downturn., the market still went up by 1.7%, on average.
Even though stocks were – on average – positive from the start to END of a recession – that doesn’t mean there weren’t rather significant drops in between. The typical drawdown was 29.2%, before prices eventually recovered. From there, after the END of the recession – it was found that – in just one year, “you would have made money in 85% of the cases. And after 3 years, you would have been in the green in 100% of the time!”
HOUSING PRICES:
Home prices have been one of the best hedges against a recession, having increased in price nearly each and every year, regardless of the economy. The same phenomenon also occurs with rents: nationally, rents have stayed the exact same, or even continues going higher, since fewer people can qualify to buy a house.
All of that is to say that housing prices are generally a lot less volatile since – people take a long time to move, homeowners are reluctant to make changes during times of economic uncertainty, and – outside of certain local markets, our most likely outcome is that we continue to see more of the same. As Ben Carlson points out, home prices have only declined in 7 years (since 1950) total, with 5 of those years in response to the subprime mortgage crisis of 2008, of which – isn’t a concern anymore.
WHAT YOU CAN DO:
Since the 1940s, there has been a total of 48 stock market corrections of at least 10%, which works out to one every 20 months – but only 12 fell into bear market territory. From where we stand today, based on data since 2008, with the exception of 2 times, stocks were higher a year later…and 60% of the time, stocks had recovered within just three months.
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