Stock Market is Not Forward Looking

A widespread myth persists that the stock market is a leading indicator of recessions, providing a year or more warning on average before one starts.

Actually, the stock market is a coincident indicator of sentiment towards stocks, no more no less.

The stock market sees ahead myth stems from Wall Street pimps who want you in the market 100% of the time or they don't make money.

2007 Recession Trigger

The stock market peaked in November of 2007. Recession started in December of 2007.

What was the 2007 recession trigger?

There was none, at least one that people can easily point to. More accurately, sentiment changed and that was the trigger. The pool of greater fools willing to buy houses ran out.

Conditions rapidly changed from people standing in lines wrapped around the corner to enter a lottery to buy a condo, to no one in line at all.

The change happened in a week in Florida then rapidly spread through the country with agents touting "this market is different" until the entire country was engulfed.

2020 Trigger

People are already blaming the coronavirus.

Yes, it was a trigger. No, it is not to blame.

This recession was baked in the cake long ago, running solely on fumes of Fed stimulus then Trump tax cuts.

Price vs Earnings Estimates

Image from FactSet, anecdotes mine.