It’s been a wild season in the stock market, with dropping prices and mass selloffs, and it’s likely we’re headed for more turmoil, as President Trump’s tariffs—and their predicted economic toll—could be the precursor to an eventual recession.

With these omens on the horizon, it makes sense that many people want to hold tight to their dollars and wait for an “all clear” sign before investing another penny in what appears to be a highly unstable market. After all, if we’re anticipating further economic loss, doesn’t it make sense to wait and buy when everything is healthy again?

But if you look closely at market history and consider what it means for the future, you might find that waiting for economic blue skies is less a practice in prudent patience and more one in lost opportunity.

Leading & Lagging Indicators: what the market is really telling us

Let’s start by examining some historical indicators of economic health.

Note the difference in the red graph points—this shows us that, on average, the stock market hits bottom nine months before earnings do—meaning that when companies are reporting net losses and laying off employees, or the GDP shows negative growth and we experience a full-on recession—the market has generally already hit bottom and started to recover.

This is because the stock market is a leading indicator; it considers what is going to happen or might happen rather than what is presently happening. That’s why the stock market is retreating today even though the new trade policies haven’t been fully implemented and there hasn’t been much tangible impact from them—the markets are anticipating the future losses. It’s what economists call a “discount mechanism”; the market is considering what might happen in the future and discounting valuations accordingly—hence the drop in prices and subsequent selloffs.

So, it’s important to disassociate the markets from the economy at large—they are correlated variables that impact each other, but they also fluctuate at different times and for different reasons.

the cost of waiting

So what does all this mean for your investment strategy?

To start, it means you need to think logically rather than emotionally (a favorite strategy of ours here at TriaGen). It sounds simple, but being human, it can be quite difficult, especially when your money is on the line and headlines are harbingering loss and chaos. It’s natural to want to wait things out and invest when everything feels healthy and good again, but that could cost you.

In fact, considering historical patterns, if you wait until we’re out of a recession, you couldmiss out on 70% of the market’s recovery.

That’s an opportunity you don’t want to pass up.

With this in mind, we have two pieces of advice for our clients:

1. Follow your game plan

If you already have a strategic financial plan in place that was created based on your goals, risk tolerance, and time horizon, follow it. Good investment strategies are designed to withstand market fluctuations, and straying off course because the headlines sound scary almost always does more long-term harm than good.

2. Seize your opportunity

We don’t typically advise trying to time the market because it’s not a stable long-term strategy, as no one can predict the future—but if you have anything set aside for an “opportune time,” now might be your chance to start investing it.

We don’t know if the market has already hit bottom or if there are uglier days ahead, but it’s possible we’re entering a rebound season. And while it’s not fun to buy when you expect further chaos, it could be early next year before we stop hearing all the negative economic news, even if the market has recovered by then.

This is a time to take some calculated chances—otherwise, you could miss the “recovery boom” waiting for the all-clear sign.

Investing in a Volatile Bear Market: a Big-picture recap

Here are the highlights to take with you:

• The market is a leading indicator; a forward-looking, discounting mechanism that accounts for possible future events.
• The S&P 500 typically hits bottom nine months before earnings, so by the time headlines are celebrating the end of a recession, the markets have likely already recovered and then some.
• Buying before the economy fully recovers could be a prudent investment strategy that allows you to take advantage of market recovery gains.

If you have questions about your portfolio or want to know if your investment strategy is properly aligned with your goals, we’d love to chat with you. You can schedule a meeting with us here.