It's Going to Get Better
Key Takeaways
Despite news of layoffs, slowing corporate earnings, and a mini-banking crisis which unfolded over the short span of a few days, global stocks are up just over 2% for the month.
The market actually does worse before a recession as compared to during a recession itself.
9 out of 10 times, every recession since the 1950s to 2020 has led to positive returns from global stocks 12 months later. Even if we include that 1 negative outlier in 2001, the average of 1-year returns after a recession come up to +16%.
If you’re holding the right assets, a recession is nothing to be scared about.
It may not seem like it, but it is likely that the market will continue to recover from here. Despite non-stop news of layoffs, slowing corporate earnings, and how central bank policy is plunging the world into a recession, global stocks barely moved much in March 2023 — and this is despite a mini-banking crisis which unfolded over the short span of a few days. In fact, global stocks represented by the ACWI Index are up just over 2% for the month. This really seems counter-intuitive to what is going on.
Legendary hedge fund manager Stanley Druckenmiller recently said:
“Do not invest in the present, the present is not what moves stock prices.”
In a podcast recorded for How Leaders Lead, he related a piece of advice which he learnt in the 70s when he was analysing chemical companies. Traditional investing dictated that you invest when earnings and news were great. But he learnt that companies usually overextended themselves when they were doing well. This then led to overcapacity and losses over the next few years which then led to downsizing, cost-cutting, and great profits once again. This cycle tended to repeat itself ever so often!
So in a similar way now, news continues to be bad and could get worse. However, it appears the worst of the market sell-off is now behind us. The chart below also shows this interesting bit of data. The market does worse before a recession than during a recession itself.
There is no need to worry about a recession if you are holding the right assets. If you would like to find out how you can grow your capital in a stress-free and predictable way, click here to schedule a chat with us. (Our 30-minutes exploratory meeting is complimentary — either Zoom or In-Person)
