There’s a myth going around that tracking the business cycle is a waste of time for investors. On the surface, the reasoning sounds logical. By the time it’s clear that the US has slipped into a recession, it’s too late to tone down equity positions because Mr. Market has already incorporated this information into prices. But the historical record offers a different story–and a different lesson, namely: carefully monitoring recession risk can be helpful for sidestepping the worst of a stock market correction that unfolds because of economic contraction. Skeptical? Of course you are, and rightly so. In the tortured realm of the macro-markets nexus, we’re up to our eyeballs in conflicting and misleading commentary and analysis. But let’s cut through the noise and allow the numbers to tell the story.
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