Stocks Beat Cash Even If You Could Time a Recession
The S&P 500 has proved to be remarkably resilient in the six months before downturns.
Investors could wait years for a downturn, missing out on market gains while their money loses value to inflation.
Photographer: Timothy A. Clary/AFP/Getty Images
The US economy is widely expected to tip into recession later this year. The Federal Reserve thinks so, as does Wall Street. And financial Twitter is aflutter with recession talk. Some financial observers are going further, advising investors to swap stocks for cash in anticipation of the looming downturn.
The problem with that advice is that no one knows if or when a recession will materialize. Investors could wait years for a downturn, missing out on stock market gains while their cash loses value to inflation. Or worse, they could dip in and out of stocks as recession predictions come and go, losing money to ill-timed trades along the way. Indeed, there are numerous ways a strategy built on unreliable forecasts can — and probably will— go wrong.