There’s no shortage of talk in the mainstream media about a looming recession.
For instance, Bloomberg Economics’ latest forecasts show the odds of a U.S. recession in the next year are now roughly one in three.
But as you’ll see today, we’re almost certainly already in a recession.
I’ll show how we can tell in today’s dispatch. Plus, I’ll share the one thing you must do to prosper despite the downturn.
The National Bureau of Economic Research (NBER) is a century-old nonprofit packed with economics PhDs.
It determines when U.S. recessions start and end.
To do that, it uses trailing economic data such as job losses, industrial production, and consumer spending.
That’s why it usually takes months for the NBER to call a recession after it starts.
But a more common definition of a recession is two straight quarters of shrinking economic gross domestic product (GDP).
And by that measure, recession isn’t some distant threat. It’s already in full swing.
The Bureau of Economic Analysis (BEA) tallies the government’s quarterly GDP figure.
In June, it announced the U.S. GDP fell 1.6% from January through March.
The BEA won’t release its preliminary second-quarter figures until the end of this month.
But we don’t need to wait that long to find out if GDP will be negative again.
We can get a sneak peek from something called GDPNow. It’s the Atlanta Fed’s real-time measure of GDP.
The Atlanta Fed puts these figures together using the same methodology the BEA uses for the government’s official GDP data.
And right now, the GDPNow model estimates that GDP shrunk by 1.2% in the April-to-June quarter.
A bear market is a 20% fall or more from a peak.
And figures from investment research firm CFRA show that nine of the 12 bear markets since 1948 have come with recessions.
With the tech-heavy Nasdaq down 29% from its peak… and the S&P 500 down 19.7% from its peak… stocks are hovering around bear market territory.
So it would be odd if the U.S. economy avoided a recession.
But history also shows us that panic selling at times like these is almost always the wrong move.
I know the declines we’ve been through have been brutal. They’re severely hurting every portfolio.
But you won’t heal the pain by selling now. You’ll just make it worse. And you’ll miss out on the outsized gains that follow a sell-off like this.
Here’s colleague and former hedge fund manager Teeka Tiwari…
If you’re a long-term investor, that means long term. You want to keep your trading confined to your short-term trading account…. and leave your long-term money alone.
Time repairs all stock market wounds. That’s why I beg you to leave your long-term investments alone. If you try to get smart with your long-term money, and trade in and out of your investments, you’ll fritter away your capital. This could mean an extra five to seven years of work just to recoup your losses.
You can see what Teeka means in the table below. It’s by way of Charlie Bilello at Compound Advisors.
It looks at the Wilshire 5000 Total Market Index, which tracks all 3,660 stocks listed in the U.S., regardless of size. That gives us the broadest possible measure of the U.S. stock market.
It looks at the worst six-month periods for the index over the past 50 years.
Wilshire 5000 – Worst 6-Month Periods and Following Returns
|
Worst 6-Month Periods |
Following Total Returns |
|||||||
|
Total Return |
Start Month |
End Month |
3 Months |
6 Months |
1 Year |
3 Years |
5 Years |
10 Years |
|
-42.4% |
Sep-08 |
Feb-09 |
26 |
42% |
56% |
102% |
189% |
372% |
|
-36.4% |
Jun-08 |
Nov-08 |
-16% |
6% |
27% |
53% |
132% |
288% |
|
-34.7% |
Aug-08 |
Jan-09 |
8% |
23% |
35% |
73% |
147% |
309% |
|
-33.3% |
Apr-74 |
Sep-74 |
9% |
36% |
41% |
84% |
153% |
392% |
|
-31.0% |
Oct-08 |
Mar-09 |
17% |
36% |
52% |
91% |
167% |
341% |
|
-29.5% |
Jul-08 |
Dec-08 |
-11% |
4% |
28% |
52% |
134% |
246% |
|
-29.4% |
May-08 |
Oct-08 |
-14% |
-7% |
11% |
41% |
108% |
250% |
|
-27.3% |
Apr-02 |
Sep-02 |
8% |
4% |
26% |
66% |
115% |
129% |
|
-26.3% |
Mar-74 |
Aug-74 |
-1% |
18% |
29% |
62% |
121% |
333% |
|
-21.4% |
Oct-00 |
Mar-01 |
7% |
-10% |
3% |
9% |
33% |
55% |
|
-20.3% |
Jan-22 |
Jun-22 |
||||||
|
-20.4% |
Jun-87 |
Nov-87 |
18% |
17% |
24% |
49% |
120% |
432% |
|
-19.6% |
Sep-00 |
Feb-01 |
2% |
-7% |
-8% |
2% |
22% |
44% |
|
-19.3% |
Feb-74 |
Jul-74 |
-5% |
1% |
21% |
50% |
90% |
255% |
|
-18.5% |
Aug-87 |
Jan-88 |
5% |
10% |
21% |
44% |
103% |
387% |
|
-18.3% |
Jul-87 |
Dec-87 |
8% |
15% |
18% |
43% |
109% |
405% |
|
-18.2% |
Jul-74 |
Dec-74 |
25% |
46% |
38% |
70% |
135% |
356% |
|
-17.9% |
May-74 |
Oct-74 |
7% |
22% |
26% |
51% |
100% |
318% |
|
-17.9% |
Feb-02 |
Jul-02 |
-3% |
-5% |
13% |
51% |
85% |
98% |
|
-17.8% |
Jun-74 |
Nov-74 |
19% |
35% |
36% |
65% |
123% |
334% |
|
|
Source: Charlie Bilello |
And the message is clear. Giving up at the lows was always a mistake for long-term investors.
I know it’s hard to picture now, with the media so full of negativity. But after these declines, returns over the next 3-, 5-, and 10-year periods were all positive.
And not just positive… On average, they were significantly higher than those of other six-month timeframes.
If you look at that table again, you’ll see the three-month returns following the worst six-month periods for stocks have been mixed.
That’s why I’ve been urging you to consider allocating a portion of your portfolio to a trading strategy.
That way, you can profit no matter which way the market heads.
2008 was the height of the global financial crisis. It was also one of his best trading years.
As the worst of the crisis raged… and fears mounted that the world was facing another Great Depression… Jeff’s subscribers had a shot at transformative wealth.
Newsletter industry legend Porter Stansberry was Jeff’s publisher at the time. Here’s what Porter wrote on January 29, 2009…
Jeff’s trading this year in The S&A Short Report was nothing short of heroic. He made 52 recommendations – all of them short-term trades. Out of these, 42 made money. A win rate of more than 80% in options trading is ridiculous.
The average return of every trade was a bit more than 31%. And the cumulative total return was greater than 1,700%.
Now, he’s at it again. He’s unearthed a way you can turn the current market chaos into explosive gains – ones that more than make up for any losses you’ve suffered.
Gains such as 815% in 13 days… 900% in 31 days… and 941% in 11 days.
On Wednesday at 8 p.m. ET, Jeff is hosting a special presentation with all the details on this strategy. You can reserve your free spot here.
Until tomorrow,
Chris Lowe
July 11, 2022