Recessions: investing and detection

Viewing the system equity curve and markets in general during recessions, it is clear that returns are low or even negative during these periods.  Therefore monitoring economic expansions and contractions using proven tools can be very worthwhile.

One such tool is RecessionAlert.  The following chart and table verify the usefulness of this approach.  The market is capable of sustained falls during recessions and therefore turning points marked by breadth may not hold (see breadth page).

blog figs

Note that average annual return outside recessions is 9%.  Average return during recessions is significantly negative.


13 thoughts on “Recessions: investing and detection

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  3. Nice fit with the historical data… from the trade table above is it true that RecessionAlert forecast a recession on 6/13/2012 which the system followed with an exit, or is it that the table ended on that date?!

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