Stock Market Crash: Investors Ignoring Recession Alarm Bells

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Stock-market investors rarely see a recession coming despite warning signals. As all the classic alarm bells ring again, this time is no different, experts say — setting investors up to get crushed.

, the founder of Rosenberg Research who called the 2008 downturn, detailed in the last couple of weeks how he was ridiculed in 2007 — by colleagues, clients, and members of the Federal Reserve — for his outlook.

Here's Lacy Hunt, the executive vice president of the Hoisington Investment Management Company, on the 1929 crash during a recent interview with: "The recession of the Great Depression of 1929 started in September. The stock market did not buckle until October of '29." For Rosenberg, the difference is that we currently have an inverted yield curve, a recession signal that has preceded every downturn since the 1960s.

At the moment, the yield curve has been inverted for several months. The below chart shows the share of consecutive trading days where the yield curve has been inverted. Recessions are shown the shaded grey areas.For Kantrowitz, this time is different because earnings expectations have not risen alongside stocks this year, meaning the current rally has been completely driven by multiple expansion. In other words, stocks are detached from reality.

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