No. of Recommendations: 15
These very lagging indicators will tell you there was a recession after we can all see it in the rear view mirror. The market is a leading indicator, and it's screaming Recession!Well, the FRED isn't yet calling a recession.
https://fredhelp.stlouisfed.org/fred/data/understa..."FRED uses business cycle turning points determined by the National Bureau of Economic Research (NBER) for recession shading on graphs."
"NBER defines recession as a "significant decline in economic activity that is spread across the economy and that lasts more than a few months"
As of the 4/16/2025 report, both the RRSFS and INDPRO indexes are up, so as of yet we are not in a recession.
You must not be hasty: "the stock market has predicted 13 out of the last 7 recessions.”
I truly don't get all these people running around screaming hair on fire and gloating that evil Recession is coming! Recession is coming!
The old TMF board was called UNEMOTIONAL Investing for a reason. Leave your emotions at the door and invest using cold logic without emotion.
Go with what the historical data shows, not with what your emotions are screaming to do. Fear will almost always be detrimental to investment success.
Anyway...
For investing purposes we don't really care about recessions, per se.
For timing purposes, what we care about is avoiding deep losses but not missing large gains.
The statistics show that the standard 200day/43week/10month simple moving average timing reduces the losses but also reduces the gains, while slightly improving the volatility metrics.
In the 2016 GTT paper, he analyzed a bunch of publicly available economy factors and determined that -- for purposes of timing -- the SMA sell signal should be ignored when both these two FRED indexes were positive year-over-year.
Doesn't matter if you call this "recession indicator" or not. Call it "SMA Sell Gate" if that makes you happier.
I call it "Disconfirm Recession", but that's just me. Ever since I went bald I don't have the ability to run around with my hair on fire. ;-)
So here is the statistics I have. I created this spreadsheet myself, using publicly available data.
IN periods include dividends. OUT periods get 1 year T-Bill interest.
Using SPX (S&P500 index) weekly, 2/5/1950 to 3/4/2024
Buy & Hold:
11.4% CAGR
-51% MaxDD
1.05 Sortino
15% stdev
SPX with 43 week SMA:
9.2% CAGR
-28% MaxDD
1.18 Sortino
11% stdev
Same, but with FRED indicators gating the sell signal:
11.5% CAGR
-26% MaxDD
1.87 Sortino
12% stdev
So I grit my teeth and ignore my emotions and won't sell unless & until one of the FRED indexes turns south.
I haven't run it using 99-day-high timing instead of SMA, I don't have that data. From what I recall, all of these simple timing schemes give about the same overall result, so it probably doesn't matter much.
