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Investors are wondering about the current health of financial markets, and for good reason: Every day, financial media and market commentators are discussing the possibility of a recession in the U.S. economy and the potential for further downside in financial markets.

Today we would like to do two things: Put the current economic conditions into historical perspective and, considering those conditions, highlight the importance of long-term investing.

In the first quarter of this year, the U.S. Gross Domestic Product (GDP) declined by 1.5%. That decline was a surprise, considering predictions of growth. Yet the decline resulted from unexpected inventory adjustments as well as a higher-than-expected trade deficit. With the Atlanta Federal Reserve’s GDPNow forecast predicting a meager 0.9% growth in second-quarter GDP, there are concerns that the conventionally held definition of a recession – two successive quarters of negative GDP – is dangerously close.

This seems a good time to remember that the National Bureau of Economic Research (NBER) is the official arbiter of recessions. Their definition includes this important phrase:


The NBER’s traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months.


With continuing jobless claims hovering at all-time lows, positive retail sales growth, and ISM Surveys meaningfully above 50, it seems far-fetched to conclude that we are currently in recession. However, investor and consumer confidence surveys are showing a large portion of the population is fearful that we are already in one. Their concern centers on high inflation and aggressive measures by global central banks to combat that inflation. U.S. GDP is important to the overall global economy, more so now with Europe’s economy hobbled by the war in Ukraine and China recovering from its Covid induced shutdown.

We don’t think that NBER is likely to call the current situation a recession. Unemployment is 3.6%. Airplanes and hotels are packed. Corporate profits are still growing. We acknowledge that this could, and may, change. But it is important to reiterate that we don’t believe the U.S. economy is currently in recession.

Even if we are wrong with our prediction, the implications for how to position investments do not change. Investors often think that a viable strategy is to see a recession on the horizon and then sell stocks ahead of the market’s reaction to it. The problem with the strategy is that the market doesn’t respond in the same way every time a recession nears.

A good example of that is this year. In past cases where the U.S. Federal Reserve has started raising interest rates, drawing forward fear of a recession, the stock market has rallied for at least two years afterwards. While we think that will be the case this time, the stock market is currently down 18% from its recent high in anticipation of it. Adding to the discomfort, bonds have produced losses in the same period, so their counterbalancing effect on stocks is not clear. This “nowhere to hide” environment may well be the result of the financial markets having already responded to a future economic downturn that may or may not even happen.

Attempting to time markets is not a good strategy. To illustrate that, we turn to one of our favorite charts.

Source: Strategas

Here the message should be clear: Trying to time markets/recessions has the potential to drag down long-term returns significantly.

Compounding the point is that the best up-days are normally found within two weeks of the worst down-days. This suggests that the instinct as to when to trim equities will normally be counterintuitive to how the markets “feel.” And while some may point out that missing the worst 5, 10, 20, etc. days would enhance returns, we point to the 8.4% buy-and-hold annualized return and suggest that every investor evaluate what their purpose is in the markets. The markets’ long-term return is a proven way to enhance wealth and purchasing power. Trying to further enhance returns through market timing is really a form of speculation.

While speculation may occasionally be successful, very few people have proven it generates the same returns as staying in the markets through good and bad times.

Investing for the long run is a tried-and-true process to achieve meaningful returns. However, it is not easy. The length of the last economic expansion and bull market hid that truth for many investors.

We invite you to discuss your investment plan with your Cerity Partners advisor. It is our passion to help you through times like these.



Please read important disclosures here.

Meet the Author

Ben Pace

Partner & Chief Investment Officer

Ben is the Chief Investment Officer and a Partner in the New York office. He leads the firm’s Investment Committee and is a member of the Executive Committee. He has more than thirty-five years of experience in investment management. Ben has been featured in the Wall Street Journal and Reuters, and is a frequent commentator on Bloomberg TV and radio, Fox TV and CNBC, appearing regularly on network programs such as Power Lunch, The Closing Bell, Squawk Box, and Worldwide Exchange.

Prior to joining Cerity Partners, Ben was Chief Investment Officer and Head of Global Investment Solutions for Deutsche Bank Private Wealth Management in the U.S. In his role as CIO, he sat on the PWM Global Investment Committee, providing input on the U.S. economy and capital markets. He oversaw the investment strategy and asset allocation for PWM clients in the U.S. As Head of Global Investment Solutions, he brought together PWM’s capital markets and investment capabilities in an effort to provide an effective and consistent experience for clients. Prior to joining Deutsche Bank in 1994, he managed equity income funds for two investment organizations. During his tenure with those institutions, he also served as a securities analyst with a particular emphasis on the financial services and healthcare industries.

He earned his Bachelor of Arts in economics from Columbia University and Master of Business Administration in finance from New York University.

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James Lebenthal

Partner & Chief Equity Strategist

Jim is the firm’s Chief Equity Strategist and a Partner in the New York office. He has over twenty-five years of experience managing investment portfolios, and is a regular contributor on CNBC.

Prior to joining Cerity Partners, Jim served as the Chief Executive Officer and Chief Investment Officer of Lebenthal Asset Management LLC, where he developed, advised and served client relationships. Prior to joining Lebenthal Asset Management in 2007, he was a financial advisor for Goldman Sachs and a partner of investment firm Levy Harkins.

Jim currently serves as the Chairman of the Board of Trustees of Mizzentop Day School and as a Director of the Akin Hall Historical Association. He was a Lieutenant of and qualified as a nuclear submarine engineer in the United States Navy where he was awarded 2 Navy Commendation Medals and 4 Navy Achievement Medals.

Jim holds a BA in molecular biology from Princeton University, an MBA from The Wharton School of Business, and a Chartered Financial Analyst designation.

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Tom Cohn

Partner & Deputy Chief Investment Officer

Tom is the Deputy Chief Investment Officer and a Partner in the New York office. He has nearly ten years of experience in various investment management roles. Tom is a member of the Investment Committee, Investment Manager Selection Sub-Committee, the Compliance Sub-Committee and the Performance Monitoring Sub-Committee.

Before joining Cerity Partners, Tom served as an Investment Analyst at Spero-Smith Investment Advisers where he was responsible for the due diligence and analysis of third-party managers and assisted in global market and asset allocation research. Prior to joining Spero-Smith, Tom worked as a Registered Investment Advisor in Syracuse, NY, where he researched a factor-based investment strategy. He started his career as an analyst in the Corporate Debt Products group at Bank of America in Boston, where he worked on a team that managed the bank’s exposure to a portfolio of middle market and multinational companies.

Tom earned a Masters of Business Administration from the S.C. Johnson Graduate School of Management at Cornell University. At Johnson, he served as a portfolio manager on the Cayuga Fund, a student-run, market-neutral hedge fund. He earned a Bachelor of Science degree in Business Administration from Boston University. Tom holds the Chartered Financial Analyst® designation.

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