Hey [Name],
The average time between two recessions is 4.8 years – using data going back to 1854.
Our last recession ended in April 2020, exactly 4 years and 10 months ago… that’s 4.8 years.
So the US economy should be right on track for another downturn… right?
Well, historically, GDP rises over the long run.
That’s been the pattern for 80+ years.
But roughly every 5 years, the economy contracts – shown by the gray NBER recession bars.
While these contractions look minor on long-term charts, zooming in on events like the 2008 financial crisis reveals their devastating impact on people’s lives.
For traders, these periods matter enormously.
Almost every significant market decline in recent financial history has coincided with economic contractions.
But, many investors have anticipated a recession over the past year – and missed one of history’s largest stock market rallies.
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The Modern Recession Timeline
While the 170-year average between recessions is 4.8 years, more recent data tells a different story:
Post-WWII average: 5.9 years between recessions
Since 1982: 8.8 years between downturns
This pattern would put our next recession around 2028.
But, recessions don’t simply occur because “enough time has passed.”
They require specific conditions…
Housing activity is one of our most reliable indicators.
Since the 1970s, declining home sales have consistently preceded economic recessions.
The logic is straightforward:
Housing represents one of the consumer’s most significant purchases.
When people stop buying homes, it signals weakening consumer strength.
Reduced spending leads to lower economic activity, potentially triggering recession.
The largest housing drops, 1982 and 2008, preceded our most severe economic downturns, with unemployment reaching historical highs in both periods.
Now, housing activity plummeted between 2022-2023, falling to its lowest level since the 2008 bottom.
If it was based on this indicator alone, we should already be in a deep recession with substantially higher unemployment.
Housing typically weakens about 18 months before unemployment rises.
When we shift housing data forward by 18 months and invert the chart of the unemployment rate, it almost perfectly matches each other.
This pattern is why we expected elevated recession risks in 2024.
While unemployment has ticked up slightly, it hasn’t approached recession levels.
This leaves a massive gap between collapsed housing activity and relatively stable employment.
The Affordability Crisis
Many argue the housing market can’t recover because it’s simply unaffordable.
The average mortgage payment now consumes 40% of the average household income – the highest level in over 30 years.
This means approximately 70% of Americans can’t afford a mortgage if we stick to the standard guideline that mortgage payments shouldn’t exceed one-third of income.
How could housing recover with affordability so challenging?
The answer lies with the top 30%, or even just the top 10%, of earners.
Since 2010, the net worth of the top 10% has grown significantly, while the bottom 50% has seen dramatically less growth.
This vast divergence explains why the housing market could recover despite being inaccessible to most Americans.
The top two income quintiles currently drive over 50% of consumer spending.
This concentrated purchasing power has helped the economy avoid recession despite most Americans feeling economic pressure.
Our 2025 Strategy
At Bravos Research, we’re positioning to capitalize on a potential housing market recovery through real estate investment trusts (REITs).
While our 2024 focus on gold and US stocks delivered 85 winning trades with an average 16.65% gain, we believe 2025 could be the year real estate explodes higher.
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