Here's How Amazing Your Investment Returns Would Be, If You Could Perfectly Forecast The Next Recession

There’s been another round of discussion lately surrounding ECRI and its infamous 2011 recession call.

Bill McBride at Calculated Risk (via Cullen Roche) has a great post up about recession forecasting and the stock market.

The question is: If you knew exactly when recessions were going to start and end, could you significantly outperform the market?

And the answer is pretty clearly yes.

This table that McBride put together shows a portfolio starting at various times in history using a mere buy-and-hold strategy vs. a portfolio that timed recessions both in and out.

There are variations, but the gist is this: An investment of $10,000 in 1970 would be worth $399,910 today using a buy-and-hold strategy. If you could time recessions perfectly, your portfolio would be worth $1,582,190. 

No wonder the hunt for a perfect recession forecasting model is such a holy grail.

recession forecasting portfolio

Photo: Calculated Risk

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