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An article from 2005 with the same prediction: http://money.cnn.com/2005/12/27/news/economy/inverted_yield_curve/index.htm http://money.cnn.com/2005/12/27/news/

• ISL 8y ago
  The S&P on roughly that date was 1268. In the depths of the recession, it reached as low as 684.
  • yellowstuff 8y ago
    Then a year after the lows it was back over 1200, and it's basically been straight up since then. Unless you timed things very accurately you were better off simply holding.
    • codingdave 8y ago
      Over the long run, that is always true. Just hold and grow, until you are within 10 years of retiring. Then move to a more conservative position.
      • timr 8y ago
        "Over the long run, that is always true. Just hold and grow, until you are within 10 years of retiring." No, it isn't. It's quite possible to lose money with a buy-and-hold strategy if you get unlucky, particularly if you aren't diversified. It's probably the most reliable way of investing, but you can still lose money. Stocks are not guaranteed to go up over all possible 50-year intervals. Monte carlo simulations of S&P500 investments illustrate this: https://seekingalpha.com/article/4109617-buy-hold-just-works?page=2 https://seekingalpha.com/article/4109617-buy-hold-just-works...
        • Retric 8y ago
          Monte carlo simulations don't model reality very well here. Years are not independent of each other. For buy and hold to fail for something like the S&P500, companies would need to fail to make money or pay dividends for 50 years. If that's going on retirement is the least of your concerns.
          • timr 8y ago
            Did you even read the link? The year you enter the market is the random variate. It is a simple, uncontroversial fact that the stock market is not guaranteed to return your money over a randomly chosen N-year period. LTBH merely minimizes the chance that you'll lose money; it doesn't eliminate the chance.
            • timr 8y ago
              It's a fact, folks. Downvoting doesn't change it, and you don't get to have opinions about it. If you believe the stock market guarantees you safe returns, you are wrong. No matter what strategy you use, no matter what outlook you choose, you can lose money in the stock market. Don't invest what you can't afford to lose.
              • sciurus 8y ago
                You say "don't invest what you can't afford to lose". If you want to eventually retire, what's the alternative? Editing as clarification for downvoters: This was a sincere question. Since no one can afford to lose their retirement savings, but few people will generate enough income to retire without making long-term investments in the stock market, I was curious what strategy timr was actually advocating. My own approach is to invest in index funds that automatically adjust their investments to be more conservative as my retirement date nears.
                • timr 8y ago
                  If you can't afford to lose it, you should put it in a savings account, a CD or another guaranteed asset until you've accumulated sufficient wealth that you can afford to take risks. This is investing 101. Any financial planner will tell you the same thing. Most will tell you that you shouldn't have money in the stock market if you're going to need it within the next five years. Ten years is a better number.
      • Latteland 8y ago
        Suppose you were planning to retire in 2018, and you sold in 2008 or 2009 after the economy crashed. Bad things would happen. No one knew if or how fast the stock market would come back. Better to sell a little bit over time and move to safer investments. But there are many studies showing no one can time the market.
        • fjsolwmv 8y ago
          If you pre-retired in 2008, you enjoyed decades of previous gains, even if you sold at the trough.
        • codingdave 8y ago
          Agreed - perhaps I phrased it incorrectly, but I meant to say the you start moving investments out of the market 10 years prior to your retirement date, not that you sell everything in one huge move at the 10 year mark.
    • rubicon33 8y ago
      Housing markets in many areas didn't recover for 8+ years.
      • paulddraper 8y ago
        The supply of developed real estate has much more inertia than most of the market. It takes most of a decade to see the full effects of a temporary surplus or shortage.
    • ISL 8y ago
      One could have bought again at 1100 and still reduced losses significantly.
  • panarky 8y ago
    684 was at the close. The intraday low was 666. https://imgur.com/a/VfV4TAe https://imgur.com/a/VfV4TAe
• Nokinside 8y ago
  Predicting recession reliably 2-3 years in advance with 2 year window would be really good indicator.
  • darkerside 8y ago
    DOW 2005: ~10,000 DOW 2007: ~13,000 DOW 2009: ~8,000 DOW 2009 (later): ~10,000 DOW 2011: ~12,500 A 2 year window of precision is completely useless
    • wokky 8y ago
      The stock market is not the economy.
      • Judgmentality 8y ago
        How do you propose to measure economic health?
        • aaavl2821 8y ago
          https://ig.ft.com/sites/numbers/economies/us https://ig.ft.com/sites/numbers/economies/us
        • bunderbunder 8y ago
          Economic health in general? GDP misses some important details, but it's a much better measure than simply looking at the share prices (not even the market caps) of a small selection of companies operating in a specific sliver of the economy that was very important 100 years ago, but represents a declining fraction of overall US productivity.
          • criddell 8y ago
            GDP is awful as well. Median wages, labor participation rates, access to education and health care, etc... are all more interesting measures. If the economy is only working well for the top 20%, then it's not a very good economy no matter what the GDP and stock market says.
• mtgx 8y ago
  I think that's mostly irrelevant. 2-3 years prediction would actually be quite good. If you have large investments, 2-3 years would give you a good heads-up for what to do with them before the recession arrives. The reason I say that point is irrelevant is because what matters most is the signs that a recession is about to happen. Once you have the signs, you pretty much know the recession is inevitable, given the fact that the signs are bad enough that you think the recession could happen in a few short years.
  • Bartweiss 8y ago
    2-3 years is a great prediction if that's a stable window. But if the range is 0-3+ years, it's not clear how much benefit there is. The average growth cycle has been 4.7 years since WWII, so blindly predicting recession within the next 3 years will pan out ~60% of the time. I guess a solid 0-3 prediction would still allow aggressive positions outside that window, and caution or shorting as you come up towards 3 years since the prediction. But precisely because that would be so effective for investors, I assume it can't be that consistent a signal.
• rm_-rf_slash 8y ago
  To be fair, the economy was still fairly strong by that point. It wasn’t until 06-07 that the subprime lending really got out of hand, and even though 07 was technically when the recession started, it didn’t become a full-blown panic until 2008 when Lehman Brothers and Bear Sterns collapsed. The yield curve is like seeing upturned leaves in the wind: a storm may coming, but it’s not clear when.
  • ergothus 8y ago
    My knowledge of predicting recessions is unchanged, but my way of looking at leaves on the ground is forever changed...
    • rm_-rf_slash 8y ago
      It’s not leaves on the ground, it’s the leaves on the branches to watch. When they’re upturned, it means that the pressure system is changing, which often precludes rain.
    • smellf 8y ago
      What he's referring to is not leaves on the ground, but upturned leaves on the trees. The conventional wisdom says that a storm is coming when you can see the backs of the leaves.
• marcosdumay 8y ago
  There is something on the order of a decade between recessions. A signal with a 3 years error is actually useful here. If the signal is instead "there will be something in 2-3 years", that's instead a great signal.
  • cal5k 8y ago
    As another commenter below astutely pointed out, with a mean time between recessions of 4.7 years you could blindly make this prediction every year and be right more often than not (with a 3 year window).
    • comex 8y ago
      Perhaps, but a 50% accuracy rate is not all that impressive. While the sample size is low, it seems that historically, the yield curve as a predictor of recessions has been significantly more accurate than that.
    • jonhendry18 8y ago
      Um, how do you get 4.7 years as the mean time between recessions? As someone elsewhere notes, since the 60s we've had a recession every 5 to 10 years. Were there two recessions a year apart that I missed? EDIT: Ah, the other commenter supplied it as the mean length of an economic cycle, measured peak to peak or trough to trough. But a trough in the economic cycle isn't necessarily a recession unless the trough is two quarters of negative GDP growth.
• Latteland 8y ago
  The NYT article says precisely that recessions happened 6 months to 2 years later in all cases, except in one case where the economy dipped but wasn't officially a recession in the 1960s. This is different than a stopped clock that is eventually right. In the last 50 years we had recessions or at best a very poor economy with almost no growth (only one time avoided a recession by defn) with 6-24 month lead time after negative yield curve.