Monday, June 10, 2013

Quick Comment: Recession Calls and Markets

by Bill McBride on 6/10/2013 12:32:00 PM

Just an update: Back in March I wrote: Business Cycles and Markets . In that post, I pointed out that IF an investor could predict recessions and recoveries (even without being precise), they could significantly outperform the market.

I also pointed out that calling recessions and recoveries is NOT easy.  A recent example would be ECRI's recent series of incorrect recession calls. If investors sold when ECRI first made their recession call in Sept 2011, they would have a missed around a 40% increase in the market!

For an investor, one bad business cycle call like that would wipe out most of the advantages from trying to time cycles.

Of course I disagreed with ECRI's recent recession call (I disagreed with their incorrect recession call in 2011 too - I wasn't even on recession watch then and I'm not on recession watch now).

One of my goals with this blog is to try to call the next recession, but I don't think that will happen for some time.  Right now I'm optimistic on the economy, especially once most of the fiscal drag is behind us.  Of course I might miss the next cycle - no one has a crystal ball.

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