Recession Risk: Rising Rapidly (Or, Could We Be In One Already?)
Recession risk is rising rapidly. In fact, it is possible that we may already be in one.
While such a claim may sound impossible, given that Q4-GDP was above 5% in terms of annualized growth, such would not be the first time such a turn occurred.
As I discussed in “Shortest Recession In History,” the 2020 recession lasted just two months. However, during those two months, the economy fell by 31.4% (GDP), and the financial markets plunged by 33%. Both of those declines, as shown in the table below, are within historical norms.
Here it is graphically. The chart shows the historical length of each recession and the corresponding market decline.
However, while the effects of the “recession” were all within historical norms, the recession itself was not. As the National Bureau Of Economic Research stated at that time:
“In determining that a trough occurred in April 2020, the committee DID NOT conclude that the economy has returned to operating at normal capacity. The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession associated with the February 2020 peak.
The last sentence is the most important.