There have been 22 recessions since the turn of the 20th century -- see the table below for a list of all of them (sourced from here) -- and we have currently experienced one of the longest expansion in US history as of early 2017 - by June 2017 we will have experienced an 8-year expansion (almost 96 months) - this is the third longest bull market in over 100 years. Clearly at some point within the next 2 to 5 years, we're going to experience a recession.
This article isn't about 2017 or this latest bull market, however - it's about the economy in general and the fact that things so far have been cyclical. Given the last century of markets, we can safely assume things will continue more or less the same way unless deep structural changes cause some sort of change. These types of changes might be:
Until those things happen, a prudent person would assume a recession will occur when a bull market has been going on for a long time.
Can you predict when a recession will happen? NO.
Can you predict how bad the recession will be? NO.
BUT, can you reasonably assume there will be one? YES.
Now, why are we writing this piece? Doesn't it seem obvious? Well, in fact, there are generally two schools of thought in personal finance and investing when it comes to recessions - neither of which are healthy for most people to adopt:
What's a better option? The better way is to simply observe things in light of historical data and without trying to quantify things. In this observation, you need to be incredibly humble of your lack of ability to really predict much but you still need to be mindful of the length of bull market runs. As the run gets longer - as Year 1 turns into Year 5 and then turns into Year 8 of a bull market you will want to
Most people will sell during a recession - usually after having purchased at the previous highs in a euphoric frenzy. You, however, should be sitting calmly with a pile of cash ready to buy excellent stocks at very low prices. In the meantime, you'll still want to be investing - you don't want to stop investing and wait for a recession because you can't rally predict when it will come and you don't want to spend years sitting around waiting without getting any market returns.
Be wary of those individuals who try to predict things too much, in fact, add a lot of risk to the equality. The risk comes from the false assurance they provide themselves or others - it is better to wisely understand your total lack of knowledge about something than to confidently go forward when ou really don't understand something. As Mark Twain so eloquently stated: "It ain't what you don't know that kills you, it's what you know for sure that just ain't so."
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