Investing in a Recessionary Environment: The Catch-a-Falling Knife Dilemma
If the frequency with which a word is used is an accurate measure of its place in society, then every reader of the Wall Street Journal and the Financial Times could likely conclude that the financial media and society at large are obsessed with recessions. They want to know whether we are IN a recession, APPROACHING a recession, and if we are in a recession, how DEEP it will be, how LONG it will last, and whether it will be MILD or SEVERE. Investors wait anxiously for the government to say with conviction that "YES" we are in a recession or "NO" we are not in a recession. It seems that investors want the government to declare that we are in a recession so that they can then start counting the days until the government says the recession has passed.
But, in my opinion, by then it is too late. This obsession with recession is foolish.
I believe recession is a state of mind long before it becomes a government statistic.
Reading the signs of a looming market correction are much more important, and should be the focus of investors' attention. Perhaps investors obsess with recessions because they believe recessions lead to or produce stock market corrections.
But do they?*
*This speech was given in Nice, France in September 2023.