No one can predict recessions like Campbell Harvey.
The legendary Duke finance professor discovered that the yield curve is the best recession-forecasting tool in history.
And four Federal Reserve banks have confirmed his research.
His model has been accurate for every recession since 1953.
And right now, Campbell Harvey has troubling news for the economy and the stock market.
But for investors who are armed with the right knowledge, they have nothing to fear.
Today, I’ll walk you through what Harvey’s yield curve is predicting for next year, what mainstream economists are saying, and why you shouldn’t pull everything out of the market just yet.
The Recession Is Locked in
In Harvey’s own words,
[T]he yield curve is just the difference between a long-term interest rate and a short-term rate. Think of a 10-year Treasury bond as a long-term rate and a 3-month Treasury bill as a short-term rate. So in a normal yield curve, which we see almost all the time, the long rates are higher than the short rates.
But when the opposite occurs and short-term interest rates become higher than long-term interest rates… the economy is flashing an incoming recession warning. And that’s what it’s doing now.
Harvey’s yield curve is inverted and predicting a recession for 2024.
But somehow, economists are increasingly confident that the Fed will pull off something they never have before: Avoiding a recession after the yield curve has inverted.
According to the Wall Street Journal, less than 50% of economists are now predicting a recession next year.
The majority think the Fed will be able to slow the economy and tame inflation within two years without causing a recession – despite the worst inflation in 42 years.
Interestingly, this isn’t the first time they’ve disagreed on future outcomes.
Last year, when economists were forecasting a recession for 2023… Harvey said it wasn’t coming.
And so far, we haven’t had one this year.
Now, when all the economists say no recession is coming, the father of the best recession-forecasting tool says they are wrong.
And I agree… The Fed has sealed our fate.
The Fed hiked interest rates by 5.25% in 18 months. And when you factor in the government’s reverse money printing, then it’s equivalent to the Fed hiking interest rates to 7% or even 8%.
Whenever the Fed has hiked even a fraction of this amount in the past, we’ve always had a recession.
My economic model factors in over 100 real-time economic indicators and agrees with Campbell Harvey.
A recession is coming in 2024. And as a result, a lot of optimistic economists and traders on Wall Street are going to be blindsided.
But I’ll tell you why you shouldn’t be worried.
How to Prepare
So how should you prepare for an upcoming recession?
It might sound counterintuitive, but… Stay in the market.
The reason most bear markets are a disaster for investors isn’t because the economy collapses. Or even that most companies go out of business.
The average bear market is a 30% decline that scares investors into market timing and selling at the worst possible moment. That turns hard-earned cash into unnecessary losses.
160 years of historical data is clear. You can’t time the market. I talked about it in my essay last week, Luck Is Not a Good Retirement Strategy.
If you try, you risk losing 94% of your money.
How is this possible?
As I keep emphasizing, in the last 100 years, 99% of the market’s gains have come from the 10 best trading days of each decade. Bank of America has done extensive research on this.
And those 10 days, you can never predict in advance. The only way to guarantee that you profit from them is to keep your money in the market.
Here’s How We Can Help You Sleep Well At Night
Even if all signs point to a recession… Even if it hits… You don’t have to panic.
All you have to do is ensure you’re in the right stocks. The kinds that have weathered previous recessions, have untouchable businesses, and long histories of rewarding loyal shareholders.
Trading in and out of these stocks based on fear is the real danger when a recession strikes. All that does is make sure your losses are locked in.
And that’s where we come in.
We know the world’s best blue chips and can tell you exactly when they’re worth buying. Not just to make you rich but to keep you rich when everyone else is losing their money to panic and fear.
So if you’re worried about an upcoming recession, know that with the right moves… You have nothing to fear.
Safe Investing,
Adam Galas
Analyst, Intelligent Income Daily
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Source: Wide Moat Research