The Near-Perfect Recession Indicator

In 2025, I'm asked pretty often about, you know, “Are we entering recession?” “Are we in recession?” “Has a recession started?”

Well, I know a way to tell if you might be in recession or you know you're not, and it's basically 100% flawless. Now, here's the way it works: You do not ever get a classic business-cycle recession, what you think of as a recession. The only exception in my lifetime has been Covid, which was not a normal recession, but more of a government-induced contraction with the lockdowns, where the stock market didn't peak beforehand as measured by the S&P 500, and in more modern times, the last 50 years, the world stock market as a whole.

The stock market always peaks first. It is falling for months before you ever enter a recession. The stock market always falls before a recession starts, and sometimes it falls when it doesn't. But if it hasn't fallen, you know a recession hasn’t started.

You really only have to start worrying about, “Are we in a recession?” when you're seeing the stock market fall for a few months. In the same way, exactly, in reverse, and also with perfection, the stock market always bottoms in a bear market bottom before a recession is over.

So, it actually tells you when to start looking for better economic times ahead. Although, those better economic times ahead are again going to be three, six, nine months before you get to those better times.