Rick: Good morning. Welcome to the week in review for November 18th 2019. Joining me is Bart Schannep, the cofounder and president of Southwest investments. Good morning Bart.
Bart: Good morning Rick. How are you?
Rick: Excellent, excellent. The holiday season has begun. You’re starting to attend parties. Is that right?
Bart: Yes, I am. I will tell you that frequently at cocktail parties, conversation does wrap around what each of us do for a living. Once I let out that I’m in investments, then people frequently ask me about the economy, or more specifically, “When is the next recession coming?”
I’ve got to be honest. I don’t know when. The stock market is so strong. We recently this last week hit all new record highs on the three major indexes. To predict when the market’s going to go down is a very tough game. What do people consider down?
Just a couple of statistics from Capital Research and Management. The stock market goes down, on average, at least five percent a year, three times a year. The stock market goes down 10 percent about once a year. The stock market goes down 15 percent about once every two years and down 20 percent about once every three and a half years.
So many people are talking about this bull market is now 10 years old. Well, maybe. We did a year ago, the fourth quarter of 2018, we saw the markets go down 18 to 20 percent. That could have counted as a reset of the bull market. Specifically though, when it comes to the recession, the couple things I need to point out.
Now, we talked last week about how employment is now at record highs. Well, in the U.S., consumer spending makes up 70 percent of our economy. If we have a record number of people working, they’re going to be spending money on things.
The other thing, Rick, that really points out is there’s always a lag time on recessions. I mean, the most recent recessions, the one 10 years ago, the one we refer to as the great recession, it wasn’t declared until the recession had already been rolling for 11 months. They were 11 months late announcing when it began. Then they were 15 months late telling us when it had finished.
Rick: What you’re saying is that it may have already begun, but it may already be over before we knew it begun. Is that right?
Bart: That’s about right.
Rick: Alright. Well, thank you Bart. I appreciate your time today. Thank you for joining us. Remember to like us on Facebook and Twitter where we have miscellaneous posts throughout the week. We look forward to seeing you next week.