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Speculation about the next recession is rising as the following articles suggest.

We think this is a wasted effort. While the impact of recessions on stocks can be severe, timing them is not only quite difficult but can be counterproductive. Time is better spent on creating an asset allocation you can both (1) live with during downturns and (2) meets your goals.

Now and Then By Dave Goetsch 

Dave Goetsch, Executive Producer of The Big Bang Theory, reflects on his investment experience in the recent market downturn and contrasts his new perspective with memories of the 2008-2009 financial crisis.

 

Seeing all the recent headlines about the sudden downturn in the stock market has transported me back to February of 2009, when I was close to despair. It’s striking how different I feel now.

In February 2009, the stock market was down around 50% from its high, and everyone seemed to feel like the sky was falling. I was familiar with this state of panic because my relationship to the financial markets was that I didn’t trust them.

During and after a 10 percent stock market correction, it is natural to ask whether the correction will deepen or not. We are wired for fight or flight and about twice as sensitive to losses as gains. Those more prone to act on instinct are vulnerable to selling stocks. This can result in missed gains during the ensuing years.

Reviewing past corrections, and the gains that follow, can help short-circuit those instincts.

January’s 5.6% gain makes the rest of the year looks bright according to the January indicator. 

The logic of the January indicator, according to aficionados, is as follows: 

January Indicator

And the payoff for the rest of the year appears rich:

January Indicator

 

But can high odds of a rich payoff result from such a simple forecasting method?

Yes, according to a Wall Street technician who was quoted recently in Barron’s, … the historical ‘facts and figures’ are what they are. The data is the data.

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