How To Know In Advance When The Economic Recession Will End
Economists and investors in finance centres around the world have been asking this question for decades: How can we tell when an economic recession will end? I am going to show you exactly how.
But just think with me for a moment – can you imagine what this knowledge would do for you? How it would help your business? How it could help your job? Maybe you could start looking for that position you really want but were waiting for the economic recession to end. Or maybe you could start increasing your advertising, taking advantage of increasing sales at the end of the recession.
So, how do we tell when an economic recession will end? The answer is extremely simple – and yet it has been proven over many decades of data this last century.
It is something that you can easily research at home, and something even your kids would be able to discover quite simply.
And this is where we look to the stock market for the answer – as Ken Fisher outlined in his book, “The Wall Street Waltz”, the stock market has a magical way of leading the overall economy. Fisher discovered that the stock market will start going up before the end of an economic recession is announced.
There are so many examples of this I could not possibly list them all, but going back a mere 60 years the market started to decline half way through 1948. But six months later in 1949, the economic recession was announced. Amazingly, as people were despairing and selling their assets, the market started moving upwards half way through 1949. Six months later in 1950 the recession was deemed to be over.
But there are many more: markets in 1952 declined before a recession was announced in 1953. The stock market had predicted an economic recession again – and the end was no different.
We can see the same pattern in 1957, 1960, 1967, 1970, 1974, and then in more recent recessions like the early 1990′s and 2002. The average time-frame that the stock market leads the economy by is 6 months. Of course some will be more, and some will be less, but as a general rule 6 months is a good one to go by.
So how can you turn this information into $$? Well, considering we have had at least 3 economic recessions in the last 20 years, you can bet there will be another one in your lifetime. But when the next one hits, you’ll know in advance. And when it is about to end, you’ll be out there getting that job you want or the customers who are coming back to buy!
Dave writes for ASX Market Watch, where he has a free course and research on trading and investing in the stock market.
