Recession in US

Supply chain disruptions, a war in Ukraine, elevated inflation, and higher interest rates are raising concerns that the U.S. economy is on the brink of a recession. A recent survey says, there is more than a 50% chance of a U.S. recession within the next 18 months. Several reliable economic indicators are flashing warning signs that the U.S. economy could be rolling over.

There is no universal definition for an economic recession, but analysts and investors commonly define it as two consecutive quarters of negative gross domestic product (GDP). The National Bureau of Economic Research (NBER) is officially tasked with identifying U.S. recessions. The NBER says a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

Recession & Stock Market

Recessions have caused the majority of the biggest crashes in history so it’s understandable that stock market investors are nervous. The S&P 500 is currently down 14% or so from all-time highs. The stock market could certainly fall further from here but it won’t be easy to use the economy as some sort of signal for stock market performance if we do go into a recession. 

Why? Here is a look at every recession since 1945 along with S&P 500 returns.

The stock market and the economy are not always in sync with one another.

Sometimes the stock market front runs the economy. Sometimes the stock market is too slow to react to economic data. Sometimes stocks fall as the economy is contracting. Sometimes stocks bottom well before the economy does. 

It’s always prudent to stay invested and spend enough time in the Equity market to get the benefit of Compounding. 

Happy Investing! 

RVi