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Keep Your Eyes On The Bad Economic News

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Big declines in the stock market are associated with recessions, and stocks often bottom months before recession-end.

No one knows exactly how long the downturn in the economy will last or precisely how much the economy will shrink – or even if it will shrink. However, one thing we do know is that recessions come and recessions go. And, when they go, the stock market has always headed higher.

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The stock market, as measured by the Standard & Poor’s index, usually bottomed well in advance of the end of the 10 recessions that occurred in the past 54 years, also known as the modern era of American financial history.

It is counterintuitive: When the economic news is worst, the stock market is very likely bottoming. When the news is worst, the stock market has very likely started a new bull run. It’s a fake-out. It’s why no one can reliably predict the market: You have to reenter the market when the news is terrible.

The stock market’s pattern of bottoming a few months before a recovery should be kept in mind this week, in case inflation worsened last month, which will be known when the Consumer Price Index for October is released at 8:30 a.m. ET, Thursday, November 10.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances.
The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

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This article was written by a professional financial journalist for Financial Planners and is not intended as legal or investment advice.

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