What’s good, it’s your boy Judas with your first unsolicited financial advice in about 15 months! A lot of people have been Facetweet Chatting me and asking if we’re going to have a recession this year. Asking what they should do. Asking if they should pull their money out of the market. So, will there be a recession in 2020…Yes? No? Maybe? Who gives a shit?
I’ll start by answering the last question: Who gives a shit? If you’re nearing retirement age or a point in your life where you intend to start using money you have in the stock market as a source of funds for your daily living expenses then you should probably give some fucks if we have a recession this year. At this point in the market cycle we’re certainly “due” and if retirement is on the horizon, I’d highly recommend you talk to your financial advisor to determine if your current portfolio construct would totally fuck your plans for your Golden Years if the stock market took a 40% shit this year. I’m a very “risk-on” dude but given the fact that we’ve had an over 10 year bull market, I’d be throttling back on risk to protect my wealth if I were planning to retire in the next 5 years.
So, who wants to know if we’ll have a recession this year? Yes, we are going to have a recession in 2020. No, just kidding, we’re not. I mean, maybe we will. Who really gives a shit anyways? I guess I kind of addressed that last question already. But, bottom line, nobody really knows when we’ll have a recession. The next recession was coming in 2016, 2017, 2018 and 2019…and then it wasn’t and didn’t come. From an investment standpoint, if you’re young and/or at least 10+ years away from living on your investment gains, you should view a recession as an opportunity to lower your cost basis on your investments and put new money in to the market at a lower price…buy low, sell high still rings true ladies and gents! Believe me, I get it, seeing your Roth IRA or TSP drop 30% hurts, but if you’re not planning on touching that money for 20, 30 years, does it really matter? The market is going to go up forever anyways right!?
Historically speaking, the US stock market doubles every 7-10 years. Along the way there are many times it dips, dodges, ducks, dives and dodges its way forward and upward (see early 2016 and late 2018 market returns for recent examples)…but it has recovered from every previous recession and market correction. Will the US economy recover from the next recession? History is no indication of future performance but certainly the track record suggests that after the next recession the US stock market will recover and find new highs in the next market cycle. But what if it doesn’t? Well, if the US stock market completely implodes then the global market is going down with it…it’d be a shitstorm of epic proportions and we’d all be fucked anyways. Hope you’ve been buying toothpaste and shaving cream to barter with lol!
So, if a recession is looming, should you pull out your money and wait? The simple answer is hell no…the long answer is fuck no! “Timing the market” is EXTREMELY difficult, next to impossible to accomplish and you’re likely to get your ass handed to you if you try. Take a recent example…if you had gotten scared and sold of everything in February of 2016 when the S&P 500 dipped below 1900 thinking it was the beginning of the recession, you’d have missed out on a roughly 75% gain since then. In short, hell no you shouldn’t try to time the market. The average investor should systematically put their money in to the market via a total market or index ETF or mutual fund with a buy-and-hold strategy. This technique is called “dollar cost averaging” and is the best way to realize the average market rate of return over a 10-30 stretch of investing in the stock market. Personally, when there’s a market correction or recession, I view it as an opportunity to put extra money I’ve squirreled away in to the market!
In conclusion, we will have another recession. It will suck donkey balls. I don’t know when it will be, neither does your cousin, neither does Jim Cramer or the Oracle of Omaha himself, Mr. Warren Buffet. But, whenever the market crashes again, the US stock market will, in all likelihood, recover (or we’re all fucked anyways). Dollar cost average, don’t try to time the market, trust the process, get rich, retire early, enjoy your Golden Years! Too easy!
Recessions suck and there’s implications far outside of the stock market but this post looks at recessions from an investment standpoint ONLY…I don’t welcome or look forward to the next recession. Additionally, before purchasing any stocks or ETFs, you should do your own research and consult a financial professional because, disclaimer, I’m not a paid finance professional. Cheers, Bo.