Out of interest, I ended up getting the Conference Board LEI and lining it up with the S&P 500. Basic spreadsheet only, sorry.
Your strategy, or so called 'objective framework', is to sell before each recession, and then buy back in as the Conference Board LEI starts to rise, Therefore, I selected data spanning one year in advance of each recession and three years after each recession, for as long as the Conference Board LEI data went back. Unfortunately, 2020 was not available.
Predicting a recession one year in advance would be ideal, rather than trying to make a guess using an inverted yield curve.
Discussion-
1969, 1973, 2007 - Benefit for selling one year before the recession and buying back in as the LEI started to rise.
2001 - Benefit for selling one year before the recession, but no benefit for buying back in as the LEI started to rise.
1960, 1980, 1981, 1990 - No real benefit for selling one year before the recession and then buying back as the LEI started to rise.
Conclusion- For the strategy (of selling before a recession and then buying back in as the Conference Board LEI starts to rise) to work, you need to know exactly when to sell your stocks before a recession. Even if you could somehow predict every recession one year in advance and sell your stocks then, you may only generate superior returns half of the time. Of course, that is better than inferior returns all the time. However, nobody is ever going to be able accurately predict recessions, so the question of whether the strategy would work in reality is highly debatable.
