Rear-View Driver

By the time a recession is officially announced, it's already in the rear-view mirror.

The past can offer clues when it comes to investing, but to reach our destination, we must look forward, only glancing in the rear-view mirror.

A non-partisan organization (NBER) determines the official start of a recession only after the recession has started. Historically, we've found that it has taken between 4 and 21 months to assess whether a recession has occurred. Officially.

Therefore, when a recession is announced, markets likely have already priced in a decline and could even be positioned for a recovery phase. Exiting the stock market once a recession is officially determined is akin to driving home while looking only in the rear view mirror.

Price movements and recession periods don't always follow the yellow parallel lines of a no-pass zone. Instead, they are part of a dynamic business cycle that can impact financial markets in a variety of ways. This understanding is why we position portfolios into segments based on both time and investment type. Specifically to withstand the short-term uncertainty and participate in, and benefit from the eventual recovery periods.

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Photo by Kalle Kortelainen on Unsplash