The Economic Advisor

When Will an Economic Recession End? How to Know in Advance

That’s right – I’m going to show you what thousands of economists, financial planners and analysts the world over struggle to find: How to know when the economic recession will end, and how to know it in advance.

But just think with me for a moment – can you imagine what this knowledge would do for you? How it would help your business? How it could help your job? Maybe you could start looking for that position you really want but were waiting for the economic recession to end. Or maybe you could start increasing your advertising, taking advantage of increasing sales at the end of the recession.

So, how do we tell when an economic recession will end? The answer is extremely simple – and yet it has been proven over many decades of data this last century.

It is something that you can easily research at home, and something even your kids would be able to discover quite simply.

For the answer we look to Ken Fisher in his book “The Wall Street Waltz”. It’s actually where the stock market comes in to play, because the stock market, believe it or not, has a magical way of leading the overall economy. In fact, the stock market will go down well before we ever hear word of a recession, and it will go up long before we get confirmation that the economic recession is over.

Let’s look at an example: Half way through 1948, the market topped and started to decline. It wasn’t until 1949 that the recession “hit” consumers. Then, just when people were despairing that it might last forever, the began an upward climb half way through 1949, and in 1950 the recession was declared over.

Or further: in late 1952 the market topped out. Half way through 1953 the recession was declared. The stock market had done it again!

We can see the same pattern in 1957, 1960, 1967, 1970, 1974, and then in more recent recessions like the early 1990′s and 2002. The average time-frame that the stock market leads the economy by is 6 months. Of course some will be more, and some will be less, but as a general rule 6 months is a good one to go by.

So what does this mean for you? Well, the next time a recession hits (and it will), keep a close eye on the stock market. When it starts to rise, in 6 months time you’ll be ready to take full advantage of a booming economy!

Get your free course on trading and investing in the stock market, and also free independent stock market research by Dave McLachlan at ASXMarketWatch.com.