The next recession is coming, but the real question is When is the next recession coming?
I hate to be the bearer of bad news but every second of every day we edge closer to the next recession coming. No I’m not a fortune teller or even proclaiming to be some financial guru calling themselves an investing wizard. I’m just smart enough to know that we’ve had recessions in the past, and another recession is coming at some point in the future. Only a crazy person would believe they could pinpoint when the next recession will hit. Often you won’t even know you are in the middle of a recession until it is almost over. The world goes on.
By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™
We all know the story of “Henny Penny” you know “The sky is falling….the sky is falling….” Well the sky hasn’t yet fallen, and many people squawking on TV or in the media about recessions are about as accurate at predicting the next recession as Henny Penny has been predicting the sky falling.
“Are you prepared for the coming economic collapse?”
I received an email with this headline from a TV host from a major TV network, I won’t embarrass them by naming them by name. ‘Economic Collapse’ and the next recession coming are not the same thing.
You may be thinking I’m nuts after reading the intro paragraph above. If you are like me every time you turn on the news or open a newspaper some “financial guru” or “investing expert” or “talking head who just happens to have a camera pointed at them” is espousing their forecast of when the next recession coming will hit. This onslaught of fake news and #alternativeFacts has been slung at you daily or even hourly since the end of the GREAT RECESSION in June 2009. May I state the obvious and point out that this was over 7+ years ago. While many Americans mistakenly believe the stock market has gone down since Obama took office, I assure that has not been the case. Hopefully the news of the Dow Jones passing 26,000 for the first time will encourage some people to be proactive and take steps to their financial houses in order.
Past Performance….Is not without Stock Market Drops
Past performance of their predictions, or how many initials they have after their name is immaterial, their current touting of the pending financial crisis du jour that will bring on fiscal ruin to the stock markets are just dead wrong. It also seems as if the financial news is there to scare you so much you continuously make poor financial decisions that will keep you watching their program hoping to avoid those mistakes in the future.
You may hearing about a big recession or a small one, a long recession or even a brief one. Their goal seems to be to get you to panic and think your only option is to bail out of the market before you get slaughtered. And all I want to do it my best Cher impression from “Moonstruck” and slap you and say “SNAP OUT OF IT”.
Whether you are going it alone, working with some salesperson, stockbroker, bank teller, or ideally a trusted Fiduciary Certified Financial Planner I’ll leave that to you to decide who you want to trust you financial future to. Either way, I would like to impart of few small tokens of wisdom and help you become less terrified of the word “recession” and realize they are regular occurrences, and are a fact of life.
Is the Next Recession Coming and should you even care?
First off they have not historically been as catastrophic as people make them out to be. Secondly, you can’t have a successful investment strategy based on fear of some pending potential recession. You will end up doing what do many people do regularly and BUY HIGH SELL LOW. (That is bad, in case it wasn’t obvious) Trying to time the market is a fools journey, as you have to know exactly when to sell, and then exactly when to get back into the market again. And continue to do this repeatedly, I can tell you it doesn’t work.
Here is what I can tell you about predictions, 2017 is the current year, and there either will or won’t be a recession. I feel pretty confident saying that in almost any year in the future as well. Like most phenomena that occur in the world of finance, recessions are not predictable on a precise or consistent basic. Of course many people predict each coming recession and sometimes they may be right, but I liken this to the old saying “even a broken clock gets the time right twice per day.” The next recession coming might be big or small, short or long.
I feel better getting this off my chest how are you feeling? Pretty good I hope?
What exactly is a recession anyways? According to the National Bureau of Economic Research, which happens to be the official arbiter of economic expansion and contraction here in the Great USA it’s a “period of TEMPORARY economic decline during which trade and industrial activity are reduced, generally classified by a fall in GDP in two successive quarters.”
While if I had to guess many of you are still looking for “end of the world” in the definition. I think you should more focus on the fact that TEMPORARY is mentioned here.
“Every strike brings me closer to the next home run.”
– Babe Ruth
I’ve pulled a few facts on recessions that I think you might find interesting if not educational.
1) There have been 11 recessions since the end of WWII. The average length of a recession has been 11 months.*
2) From VJ day roughly August 1945 to September 2016, the economy in the US has been in recession for 122 out of 854 months. I’ll save you the math that is around 14% of the time. *
3) There are have been 11 recessions since WWII and they have taken the economy down around 2.2%. *
Taking it all in -The Next Recession is Coming.
Taking these together it may be a bit clearer why I don’t think the sky is falling, and likewise I’m not terribly fearful of a recessions. Of course they don’t prove anything, the next recession could be the big one, who knows. What you should remember that roughly 86% of the time the economy is not in recession.
I’m sure your eyes have glassed over by now. So I will focus more on what Stock Market Drops means to you and you finances. Do yourself a favor, and don’t stress out about the day to day movements of the “stock market” let alone the overall economy. You can’t do anything about it. Either way, what the stock market does today or tomorrow really has no direct effect on your likelihood of an enjoyable retirement. Focus more on the longer more relevant time frames, for example if you are 10 years from retirement, do you expect the stock market to be higher or lower in 10 years?
Your worry about the “pending recession” in the “relative” near future may be tied to how much of the financial news you are ingesting. Bad news sells, happy thoughts are boring.
Spoiler Alert Next Recession Coming Trump or no Trump:
You can’t time the stock market. Hate to break it to you, movement in the “market” doesn’t directly correlate with the beginning at end of recessions. Nor does it magically happen at some given interval before or after a recession. Hypothetically even if you were precisely able to predict the beginning and the end of the new recession, you would then have figure of when to get out of the market, and back into market to capitalize on this information.
You don’t have to take my word alone on this topic. Have a conversation with your financial professional about trying to predict the future or time the market. If they recommend you try and do either of those, RUN. On the other hand if they are a Fiduciary Certified Financial Planner™ I would hope they would help you understand that over a lifetime, you will be better off just riding out temporary declines in both your investments, and the economy as a whole. There is always some pending crisis of the day, or impending doom of a recession. If you listened to all the headlines blasted at you via the 24 hour news cycle you may never leave the safety of your house again. Then what fun would life be. Not to mention the potential investment returns you might be missing.
Until Next time and as always Be Fiscally Fabulous. Live for Today, Save For Tomorrow.
DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planner with DRM WEALTH MANAGEMENT a Registered Investment Advisor. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to the Advocate Magazine Investopedia and Huffington Post as well as the author of the Financial Planner Los Angeles Blog. Follow him on Facebook, or via his website www.davidraefp.com
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The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual. This does not constitute an endorsement by DRM Wealth Management. To determine which investments may be appropriate for you, consult with your fiduciary financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. “Next recession coming”
*Stock Market Drops and Next recession coming stats via Investopedia.