What do Recession Signals Tell Us?

Many investors are sitting on the edge of their proverbial seats at this point in time, concerned about the most recent market correction in North American stocks, and more specifically, worried that the recent market correction could in fact, turn into a full-blown recession in the near term.

These concerns are certainly warranted, given the nearly 10-year bull market investors have enjoyed since the depths of the great recession - the question is, how can one tell when the next recession will begin, and just how bad it will be?

Expert opinion appears to be mixed on the subject of just how bad an upcoming recession could and will be. Some indicate that the fact that many of the issues which were exposed during the most recent recession have not been fully dealt with could signal a repetition of history.

Others signal that interest rates remain too low from a global perspective and central banks do not have the tools available to them to combat such a recession this time around, which could mean a much longer and more shallow recession this time.

Whatever the case may be, it appears most market experts believe a recession is coming in the next one to two years, due primarily to slowing global growth and the ascent in valuations for many defensive industries and away from high-growth/high-volatility segments of the market (think cryptocurrencies).

The jury may be out, however, I would caution investors to re-balance one's portfolio appropriately and add market hedges, if one has not already done so, in the near term.

Invest wisely, my friends.