Recession Forecasting Model Hits Highest Risk Level Since 1981, But Historically Staying Invested Pays Off Long-Term
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A recession forecasting tool shows the highest probability of a recession in the next 12 months (63%) since 1981. Historically when this indicator is over 50%, a recession follows within a year.
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The S&P 500 has declined an average of 31% during past recessions. This implies a potential 30% drop from current levels if a recession hits in 2024.
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Staying invested through downturns is a better strategy than trying to time the market. The S&P 500 has always recovered and delivered strong returns over long timeframes.
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After hitting bottom during past recessions, the S&P 500 rebounded 40% on average over the next 12 months.
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Forecasting tools could be wrong, so it's impossible to know if or when this indicator will correctly predict another recession.