Brace for (Recession) Impact

“A Significant Decline”

Looking for Value

Lengthy Transition

Larry Summers Weighs In

SIC Time!

Feeling the Need for Travel

The Strange Recession we are now entering is strange for another reason beside those I described last week. The last “normal” recession ended in 2009, almost 13 years ago. As with most unpleasant experiences, we don’t put a lot of energy into remembering what it was like.

The problem is we need to remember it in order to prepare for the next one, which is now upon us. Today we’ll remind ourselves of what happens in a typical recession, both to the economy and the financial markets. We’ll also look at some of the ways this one probably won’t be typical. It certainly has the potential to be worse.

This week saw some volatility (the good kind) as stock prices recovered and oil retreated a bit. The basic facts haven’t changed, though. Recession was already a strong possibility even before the shooting started… and the genie is out of the bottle even if the shooting stops. The Russian sanctions will continue, which means the global realignment will continue, too.

Another factor is China’s growing COVID outbreak, which is already closing some factories and may lead to more supply chain snarls. Some interpret this bullishly, thinking a China slowdown will reduce energy and commodity prices. That may be correct, but not for more than a few weeks. We face recessionary forces that are much harder to suppress.

Really, I can only imagine one scenario that would make all this better. That would be if Vladimir Putin loses power and is replaced by someone of a sharply different philosophy and that person quickly leads Russia in a new, more democratic direction. Then the war and sanctions could end and Russian exports resume. Possible? Yes. But not likely.

That being the case, recession is where we are headed. So let’s review what it will be like.