Remember Janet Yellen?
The soft-spoken lady who presided over the Fed in the aftermath of the Great Recession…
The one who famously proclaimed there wouldn’t be anymore financial crises in our lifetimes.
Perhaps you remember her better as the one who kept interest rates at 0.25% throughout her tenure… even though many warned that this approach would lead to massive asset bubbles.
I am sure her policy would be popular with the current White House administration.
Recently, Ms. Yellen reappeared in the limelight with another ludicrous statement.
According to Janet, an inverted yield curve is not an accurate signal for interpreting the current economic situation.
I probably don’t need to tell you how dangerous those words could be.
Many who’ve uttered the sentence “This time is different” in the past have seen their wealth evaporate almost overnight.
I would like you to mark these words instead:
The inverted yield curve has been 100% accurate in predicting the recessions of the last 40 years.
What History Can Teach Us About The Timing Of The Next Recession
The question is not whether a recession will happen but rather how much time remains until the next recession begins… and what you can do to prepare for it.
I don’t have a crystal ball that tells me the precise date and hour of the next downturn. However, I believe that historical data offers a pretty accurate estimate.
If you look at the last six economic downturns, you see that it took between 8 and 15 months from the date of the yield curve inversion until the start of a recession. That’s an average of 11 months.
Extrapolating from this and remembering that the yield curve first inverted in May, we’re looking at a next U.S. recession between January and August of next year, most likely around April.
However, what’s more alarming when looking at these figures is how ambivalent the market is behaving toward this historically accurate recession signal.
On average, the market hasn’t reached its top until seven months after the yield curve inversion.
Meaning, the market could grow for at least another three months before turning downwards.
It’s a classic example of irrational exuberance in action… and it’s happening as you read this.
How To Prepare For The Next Downturn Today
For me, a 100% accurate recession signal is precisely that, no matter how different the situation may seem this time around.
And when I see one, I know it’s time to start moving my funds into safe-haven assets while they’re still cheap.
I am perfectly content watching markets reach new highs because I know it’s only a matter of months before the house of cards collapses.
While you have countercyclical investment options, for me gold is the safest harbor in a storm. I believe it will perform best during the coming downturn.
I lay out my complete recession-proof investment plan in the latest edition of my True Retirement Wealth. If you’re a subscriber, it should be in your in-box.