In my 50+ years of managing money — beginning in the days when Carly Simon was releasing hits — recessions have mostly been surprises. Now almost everyone expects one.
The Philadelphia Fed’s recession probability gauge hits a record high. A poll by The Conference Board shows that 98% of American CEOs expect an economic downturn within 12 to 18 months, with 99% predicting the same for Europe. KPMG found that 63% of CEOs in Asia Pacific expect a recession. In Taiwan, it’s 9 out of 10. It’s certainly the most and longest-awaited recession in modern history.
This is where Carly Simon comes in. No stranger to life’s surprises, she sang on her 1971 single “Anticipation,” “We can never know what those days will come, but we still think about them.” That’s key, because like me, in this column noted on Christmas Day, pre-warning is pre-warning. If you’re careful, prepare. In short – to invent a rhyme I would never blame Carly for writing it himself – anticipation is mitigation.
No stranger to life’s surprises, she hummed on her 1971 single “Anticipation,” “We can never know what those days will come, but we think about them anyway.” John Angelillo/UPI/Shutterstock
Carly Simon performing on stage, New York, April 1978 Getty Images
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The recession chatter increased last spring with the Ukraine war. Growth forecasts and CEO confidence plummeted. Two quarters of (barely) shrinking US GDP raised alarms and led many to believe we were already in a recession. Now recession warnings are at DEFCON 2. If you think CEOs aren’t preparing, you must think they’re all idiots. (And if you don’t prepare, you might be the idiot — or “so vain” that you probably think this column isn’t “about you”).
More specifically, somber economic leaders are thwarting growth efforts and lowering costs as if the recession were already here. There have been 364,000 layoffs worldwide since April. US job vacancies are down 12% from the peak in March. More than a third of CEOs in Asia Pacific freeze hiring. Companies tend to lean and mean fast.
There have been 364,000 layoffs worldwide since April.AP
Carly Simon’s “Anticipation” album from 1971, Elektra Records
Aside from headcount, the World Confederation of Advertisers found that nearly a third of multinationals are cutting their advertising budgets, with 75% “scrutinizing” their spending plans. Firms are squeezing operations—speeding up debt collection, cutting out productivity-robbing meetings, and even giving up free coffee.
This is not how companies have historically acted before downturns. On the eve of the fourth-quarter 2007 recession, the Business Roundtable’s CEO Economic Outlook Index ticked higher. Respondents expected investment and employment to rise or stagnate. Well into 2008, big tech and telecommunications expansion plans made headlines. The surprise that followed added to the pain of the recession.
Recessions wring out the excesses of previous expansions – indeed, that is their very raison d’être. But this time the companies have been more involved since the spring. How much wrestling is left? Enough for a brutal recession and another bear market implosion? Unlikely. Widespread anticipation leads to slight downturns – or not at all.
A poll by The Conference Board shows that 98% of American CEOs expect an economic downturn within 12 to 18 months.
A mild recession would match the 24.5% drop in 2022 to the bottom of the bear market in October — a young beast by historical standards. And if we do dodge the recession, almost everyone will be shocked — and positively so. Stocks move mostly on surprise – hence the upcoming bull market (smaller or larger as I described Christmas Day).
Note that since the good data began in 1925, 9 out of 10 US bear markets associated with recessions ended well before the bottom of the recession. An ounce of prevention is worth a pound of cure. Nearly a year of increasing corporate sobriety means a downturn may not be as bad as feared.
As Carly Anticipation finished, “These are the good old days.” Be bullish.
Ken Fisher is the Founder and Executive Chairman of Fisher Investments, a four-time New York Times bestselling author and a regular columnist in 17 countries worldwide.