The Next RecessionThat’s a wrap on the holiday season. Now we’re in the midst of the prediction season. It’s time for countless experts to emerge and tell us when the next recession is coming. You can tune that out, unless you’re reading purely for entertainment value. Certainly, don’t make any investment decisions based on someone’s short-term predictions.
Nobel laureate Burton Malkiel had a refreshing interview last week. He knows that predicting a recession is extremely difficult. “Don’t try it at home,” he said. His best guess at the cause of the next recession is “some shock that we don’t know of now.” Yes, he basically said “I don’t know. Nobody does.”
I would expect no less from one of the pioneers of index investing. Half a day after the interview on CNBC, the U.S. killed an Iranian general. The stock market opened down one percent the next day out of worry that things would escalate. That didn’t cause the next recession (not yet at least), but it does illustrate why Malkiel wrote a book called, “A Random Walk Down Wall Street.” It’s the random, unknown things that move the market most.
Don’t waste your time trying to predict the next recession. Invest for the long-term. Make a plan that balances your risk and go on to other forms of entertainment.