3 Tell-Tale Signs That We May Be Nearing a Recession

^GSPC Chart
^GSPC Chart

Gray shaded areas represent U.S. recessions. ^GSPC data by YCharts

Where are we now? Our last recession ended nearly seven years ago (January 2009). It's important to note that recessions don't come about based only on historical patterns -- but these data points do serve as a general guideline that helps us ballpark when the U.S. economy may begin to cycle down again.

What should you do?

Now that we've examined these tell-tale signs of a recession, you might be wondering what you as an investor should be doing. The simple answer: nothing.

In theory, the recession-trough-expansion-peak cycle shouldn't alter your investment strategy much, if at all. As long as you're buying high quality, dividend-paying businesses, there's not much incentive for you to run for the exit. Not to mention that it's also impossible to precisely time peaks and troughs over the long run with any accuracy. If you miss even a handful of the S&P 500's best days, your long-term returns could be substantially lower .

If anything, the one move you may want to consider making is to take a close look at your investment thesis in riskier high-growth stocks. Businesses that aren't on solid footing, and which have benefited most from an expanding U.S. economy, are the likeliest to be hit hard during a recession. If your investment thesis in these stocks is still strong, then perhaps no alteration is needed. If, however, your investment thesis has weakened or is broken, it may be time to reconsider and sell your higher-risk stock(s).

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The article 3 Tell-Tale Signs That We May Be Nearing a Recession originally appeared on

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy .

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