Recession Indicators: A Stock Market Exit Strategy.

In previous articles I showed that stock market timing models, such as IBH and MAC, can provide better returns than what one could get from a buy-and-hold strategy. However, investors with long-time horizons can also do well by only exiting the stock market at beginnings of recessions and returning to the market when the market is recovering. Recession indicators such as COMP are useful in identifying recession starts. To re-enter the market one can successfully use the buy signals from the IBH model. This strategy would have provided a compound annual return of 15.5% from 1980 to the end of 2012.

A complete description of the model has been published in Advisor Perspectives: The Use of Recession Indicators in Stock Market Timing

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