It has been close to 11 years since the last economic recession ended and the current bull market in U.S. equities began, marking the longest such winning streak in the country’s history. Naturally, some, if not many investors fear the law of averages will catch up with the markets sooner than later, and fretting about the next recession and market crash has become an obsession of sorts.

So, when will [blank] hit the fan? Who knows. But Josh Jamner, vice president of investment strategy at ClearBridge Investments, gave his firm’s take on its reading of the tea leaves and what it means for the economy and the stock market. And, he said, investors can use the same signals his firm uses to gain a better grasp of the forces that can influence the economy and, ultimately, the direction of the markets.

In a session at this week's Inside ETFs conference in Hollywood, Fla., Jamner said investors often confuse legitimate signals with noise. “Noise,” in this case, are market pullbacks that are a natural part of bull markets but not truly indicative that the sky is falling.

“The common definition of a bear market is a drawdown of at least 20% in stocks,” he said. “There is no definition of 'market crash,' which some clients want to protect against.”

Jamner said ClearBridge devised its own definition of a market crash that consists of two simple things: there needs to be a big sell-off, and it needs to last more than a year.

“Market crashes are three times as likely to coincide with a recession then with a market pullback,” he explained.

When ascertaining the odds of a recession, Jamner noted that many people point to the fact it has been more than 10 years since the last recession. “It’s a useful starting point, but if you look outside the United States it’s not the best starting point,” Jamner said. “It’s true that the United States has never gone this long since World War 2 without having a recession. But look at Canada, the United Kingdom and Japan, which all have had 15- to 17-year runs [without a recession]. And Australia soon will have its 28th consecutive year without a recession.

“I don’t think you can just say, ‘It’s been 10 years; we’re due,’” he added.

Jamner noted that ClearBridge devised a list of 12 recession risk indicators that have historically foreshadowed a looming recession. The chart, or dashboard, contains four categories: financial markets; inflationary pressures; consumer and business activity. Each category contains various indicators. For example, the consumer category comprises housing permits, jobless claims, retail sales and job sentiment.

The color-coded symbols say that green is good for the markets, yellow indicates taking your foot off the gas, and red means hitting the brakes. The most current (as of fourth quarter 2019) overall signal for the entire dashboard is yellow.

“It’s really uncommon to have a recession without all four of these [categories] pretty much falling apart,” he noted. “Today, the consumer is four for four in green signals, which is the backbone of the economy that’s keeping things together.”

That said, the fact that the chart’s overall signal is yellow means the economy “could go either way,” he said. “For the bear case, it’s hard to know what exactly will push us over the edge. But I think the economy is in a more fragile state than most people believe.”

His rationale is that while profits are booming at S&P 500 companies, profits have basically been flat for the past four or five years among smaller companies that employ the majority of American workers. He said that’s resulting in reduced workers’ hours.

“And if pressure builds at some point that will spill over and they’ll have to start firing workers, which could put us into a classic recessionary death spiral, and indicators would start turning red,” Jamner explained.

He said the bull case is that the Federal Reserve, along with other central banks, are in easing mode regarding interest rates. Last year, the five major central banks—the Fed, European Central Bank, Bank of England, Bank of Japan and the People’s Bank of China—tightened interest rate policy in one way or another. This year is a different story with 75% of global central banks on hold and 25% cutting interest rates.

Jamner said if businesses can take advantage of the Fed pumping more liquidity into the system, and the consumer hangs on, we could slowly work our way out of yellow and into green over the next two or three quarters. Such a scenario, he added, could be good for the financial markets.

“We believe we’re in the midst of a secular bull market and have been for a while,” he said. “That’s not to say there can’t be sell-offs along the way. But we think the next 10 years can be a pretty compelling time to be invested in equities."

And if things go unexpectedly south, as in way below the Mason-Dixon Line, Jamner posited that ClearBridge’s recession risk dashboard could provide clues that might help financial advisors and their clients avoid some nasty losses.

“This dashboard can be used to make tweaks within an asset allocation,” he said. “When the dashboard turns red, we think that’s a good time to think about de-risking.