Harry Truman famously said that it’s a recession when your neighbor loses his job and a depression when you lose yours.

By that definition — with unemployment now back to pre-pandemic levels — most people are not experiencing a recession right now.

The National Bureau of Economic Research (NBER) — the official arbiter of recessions — agrees, though for very different reasons.

Most Americans disagree. Whether it’s individual circumstance, a reaction to higher prices at the pump and the grocery store, or personal politics, more than 60 percent of Americans believe we’re living in recession right now, according to the latest IBD/TIPP Economic Optimism Index released Tuesday by Investor’s Business Daily.

From the standpoint of the stock market, making a recession “official” is important because there tends to be a difference between a bear market that’s accompanied by a recession and one that isn’t. (Recessionary bear markets, unsurprisingly, tend to go deeper and last longer.)

Individual investors and savers, however, don’t need some economic egghead to give a recession an official stamp of approval.


If it looks like a duck and walks like a duck and quacks like a duck, well, in this case it’s a recession.

Ultimately, how you feel about the economy is going to factor into how you weather the downturn, from a strategic standpoint and more.

Before digging into those investment decisions, let’s first consider the thorny issue of whether what’s happening now truly qualifies as a recession.

The NBER Business Cycle Dating Committee — which makes the final decision — says in its books that a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

Studying economics in college, I learned that consecutive quarters of shrinkage in the gross domestic product was the common benchmark for a recession. By that measure, recession is on and very real; gross domestic product declined at an annualized rate of 1.6 percent in the first quarter, then dropped another 0.9 percent in the second.

Alas, it’s not that simple. The Committee doesn’t jump to conclusions; in April of 2001, the economy went into recession, but the NBER didn’t declare it as such until 27 months later in July 2003.


The committee also considers factors beyond a shriveling GDP, most notably job growth numbers. An “ideal recession,” if there is such a thing, would see virtually all economic indicators moving south at the same time. That’s not happening, judging from the employment numbers alone.

Economists don’t want jump to conclusions on mixed signals, apply the label and then remove it; call it a fear of premature supposition.

Consumers not only aren’t bound by such logic and guidelines, they’re confused by the last time the NBER officially broke out the R word; it was shortly after the first wave of COVID-19 hit the country, and it never reached the “lasts more than a few months” part of NBER’s criteria.


The economic decline lasted from March to April in 2020, marking the shortest recession in U.S. history; it didn’t even get halfway to the “two quarters of negative GDP growth” standard.

By the time most individuals had adjusted to the economic troubles, the COVID recession was over and things started to feel better.


Historically, recessions have lasted an average of 17 months. Whatever term you use for today’s economic situation, no one seems to expect the description to change overnight with a sudden return to happy days.

But a recession in which the economy shrinks but employment numbers are up would be unlike any recession in history.

It also would set up for being a shallow decline; it could last a long time, but not go very deep, witnessed by the fact that the GDP declines are way below the 5 percent kind of drops typical of recessions.

While economists have the academic debate over applying the R word, there’s not much confusion for the public, which is seeing high inflation and declining growth, the recipe for stagflation if it is allowed to fester awhile.

High inflation/low growth makes for a tough investing environment.

Bonds and cash are suffering because their yields are typically falling behind inflation.

Stocks often struggle because companies face rising costs and expenses, which makes planning and execution more difficult. Plus, stock valuations are pressured.


Real estate typically does better, at least if there is a fixed-rate mortgage attached to it and it was properly valued and not overpriced when purchased, but most people aren’t racing out to buy more real estate at a time when mortgage rates are rising

Commodities often are considered safe haven during stagflationary times, but most investors aren’t comfortable loading up on them, so they are more a diversifier than a core strategy.

Ultimately, that’s why the recession problem is so vexing.

Whether the NBER applies the label or not, there’s just not much ordinary investors can do when performance sucks and the market’s signals are jumbled and potentially misleading.

Do too much to adjust to current times and there is real risk of damaging your portfolio.

Do too little and you’re blindly hoping that the economy doesn’t hurt you too badly while waiting for time to heal your wounds.

I talk with market experts every day, and it’s nearly impossible to find one right now who doesn’t think more significant pain is coming. It may not be until 2023, and it could be over by this time next year, but the next recovery can’t start until the current decline plays out.

Thus, the right strategy now is about buckling up, having a portfolio where you can live with the downside risk/movement you are likely to experience, while having a portfolio that you believe will benefit when the recovery starts.

It’s staying the course through stormy seas.

Recession or not, this is an unpleasant economy. Steel your stomach if you hope to come away from it better off once the experts start arguing about whether the next bull market has started.