Recession: When is the Right Time to Worry?

Recession Obsession: How Worrying Too Much Can Ruin a Record Bull Market

September 4, 2018 By Colin O'Shea • Securities Analyst

On Aug. 24 the S&P 500 closed at a new all-time high, officially marking the longest bull market on record. The current bull market began when the S&P 500 hit its low on March 9, 2009.  It reached a milestone on Aug. 22, 2018, when it hit 3,453 days — surpassing the bull market of the 90s in terms of a time period.  However, in order to make it official, the S&P 500 also needed to reach a new all-time high closing price (which it did last Friday). 

How long will the Record bull market last?

The truth is, no one knows. There are many analysts, pundits, and prognosticators trying to predict the next recession.  In hindsight, someone will be right — but that does not make him or her an oracle. Even a broken clock is right twice a day.

According to Peter Lynch, former mutual fund manager at Fidelity Investments, “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”

Even the best financial professionals cannot accurately predict the next downturn.  The graph below shows numerous financial professionals incorrectly calling for the end to the current bull market over the past six years. As you can see, the market paid little attention:

Incorrect Recession Predictions

More often than not, investors who try to time the market end up hurting their performance by buying and selling at the wrong time.  According to the most recent investor behavior study by Dalbar, investors guessed right on the direction of the market about half of the time over the last 20 years.  As a result, the following chart shows the average investor underperforms the stock and bond market.

Average Investor Returns
Source: 2018 Quantitative Analysis of Investor Behavior Report by Dalbar

At Security National Bank, we do not try to time the markets.  We design, build and manage portfolios to meet the long term goals of our clients.  We remain fully invested throughout the market cycle and use diversification to control risk. Contact an advisor at Security National Bank to develop a long-term investment strategy and worry less about predicting the next recession.

About the Author

Colin O'Shea

Colin O'Shea is a Securities Analyst within the Wealth Management Division at Security National Bank, where he researches and analyzes assets and trade securities and helps develop investment strategies. A veteran who served in the U.S. Army for 12 years, O'Shea holds a Business Administration Degree from Morningside College.