Capital InsightsMarkets

Survive and Advance


March is my favorite time of year. I like the way the transition in the sports world in March reflects the move out of winter and into spring. We start March Madness mid-month, when there is snow on the ground at many schools where they’re still playing college basketball. By the time the tournament ends, the weather has turned, and we have gone from college basketball on Monday, to the blue skies and green fields of baseball’s opening day, and then on to blooming azaleas and birdsong in Augusta, GA on for The Masters.

The NCAA Tournament is called March Madness for a reason, as anyone who watched this year’s tournament knows. What we expect is rarely what comes to pass. Smaller schools like Furman or Farleigh Dickinson (or several years ago, George Mason) shouldn’t be able to compete with big schools, but each year brings a handful of upsets and Cinderella teams. Kentucky has to do everything they can to get past a little school like St. Peter’s, a team they’d typically dominate. Sometimes, they don’t, and history is made.

One mantra you’ll hear from many coaches and players in March is “survive and advance.” In a competition with so much volatility and chance, to survive and advance to the next round a team has to limit mistakes, survive dry spells, and find a way to stay in the game even when things aren’t going their way. To succeed, teams must find a way to manage through uncomfortable situations.



In the financial world this year, March brought discomfort with news of the failure of Silicon Valley Bank, and associated trouble at other smaller regional banks. While the government acted swiftly to contain the threat, the news injected new volatility into a year that had begun with a healthy dose of uncertainty.

The question for 2023 has been if, when, and to what extent will we see a recession. By nature, this involves some gazing into the crystal ball to make predictions about the future, something science tells we don’t do very well.

While the future is uncertain, we can find some clarity in the current data and trends, and at least speak in the language of possibilities and probabilities.

It is possible we avoid recession entirely and have a “soft landing,” but it’s not very probable. Government officials at the Federal Reserve and executives at big banks have commented recently that chances of a soft landing have increased to start 2023. But even so, you’d be hard pressed to find someone who thinks we have more than a 20% or 30% shot at a soft landing.

Over the last several months we have been checking off most of the boxes on the march to recession. Technical measures, like the yield curve and money supply at levels typically seen before a recession, are being monitored closely. The manufacturing sector has slowed to a level which often indicates recession. The Conference Board’s Leading Economic Indicators Index dropped in March to a level last seen during the recessions of 2001, 2008, and 2020. On the other hand, inflation is falling and employment is steady, but those are the sole bright spots at the moment.

A recession is probable later this year or early in 2024. As of now, the consensus is that a mild recession is more probable than a deep one, though there is considerable debate. It can be easy to get trapped into fighting the last war. Those of us who have been around a bit are carrying the scars of the last two recessions in 2008 and 2020, two of the most severe in the last 100 years, each with unemployment over 10% and a GDP loss of more than 5%.

The next recession could be like those two, but it is more likely to be similar to the recessions of 1980, 1991, or 2001.  During those “standard issue” recessions, the economy contracted between 0.3% and 2.2%, the unemployment rate rose to between 6.3% and 7.8%, and the recession lasted between 6 and 8 months.


What does this mean for markets? The crystal ball is hazy. We have had nine recessions dating back to 1960. In six of those nine recessions, the stock market actually stayed flat or increased in these periods. A recession does not guarantee a market decline.

This is not to say that the market doesn’t go down around a recession – it almost always does. But the market is typically a leading indicator, declining in advance of the recession, and then beginning the recovery during the downturn, as investors look to the future. In eight of the nine recessions going back to 1960, the market began the recovery well before the recession ended.

Thus, one reasonable opinion making the rounds holds that the market could “retest the lows.” In plain English this means then we might expect the market to pull back a bit to the low point of the current bear market, which was the 3575 level the S&P 500 hit on October 12th, 2022.  At that point, the market was down 25% from its peak in January 2022.  Since that October low, the market has recovered a bit, and, as of the end of March, stood 16.7% below the January 2022 high.

If we were to bottom out at 25% below the peak, that would be relatively benign historically. During the brief COVID panic, the S&P 500 dropped 33.8%. The global financial crisis of 2008 left the S&P down 56.8% at its low, while the bursting of the tech bubble in 2000 pulled stocks down 49.2%. Going back further, the market dropped 48% around the recession of 1973-75, and 36% in 1969-70.

So, a 25% decline would be relatively mild, but it would not be out of the ordinary. We saw similar orderly stock market declines in the recessions of 1948 (-21%), 1953 (-15%), 1957 (-21%), 1960 (-14%), 1980 (-17%), 1982 (-27%), and 1991 (-20%).

There is no dependable blueprint. Sometimes recessions spell disaster for the markets, but usually not. Often, markets recover and move higher once the recession starts, but not always. Back to our framework of probable and possible, history tells us that its probable that any market declines from here will be moderate, but it’s possible they are worse. It is probable that the markets will have begun their recovery by the time we find out we are in a recession, though it’s possible that it could take a little longer.


As an investor, this push and pull between the possible and the probable should feel familiar. On average, the market is up around three out of every four years. The bedrock tenets of financial planning and investment management – diversification, cash reserves, retirement projections, rebalancing, cash flow analysis, withdrawal rates – are aimed at weighing the 75% probability of market increase with the 25% possibility of a market decline.

During market declines and recessions, your mantra should be “survive and advance.”  The blueprint to do so is simple, but not easy.

Keep a cash reserve on hand of up to one year’s worth of expenses. Spend less than you earn. Invest in a diversified portfolio calibrated to your risk tolerance and personal situation. Leave investments with long-term horizons in place. Understand your guardrails – how much market fluctuation you can tolerate and for how long, typically determined through a financial plan.

Properly implemented, these and other strategies keep you from making irreversible mistakes, help you survive the dry spells, and stay in the game. Hindsight and history tell us that recessions come and go, and markets fluctuate, but then recoveries take hold and we move on to bigger and better things.

Survive and advance.