The Whatchamacallit - Our July 2022 Market Commentary

At -20%, the first half of this year officially went down as the worst 6-month period to start the year for the stock market (as measured by the S&P 500) since 1962 when it returned -22%. While 1970 came close to matching this year's -20.0% first half return, once you include dividends it did slightly better in 1970 at -19.5%.

Unfortunately for investors, bonds also had one of the worst first half starts to a year on record with a return of -10.4% (as measured by the Bloomberg US Aggregate bond index) which is the worst start to a year since the index's inception in 1973. By some accounts you would have to go back to before the 1900s to find worse performance for government bonds1.

The Whatchamacallit

Are we in a recession? Are we in a “Growth Slowdown”? How do we know when we are in a recession and who defines a recession anyway? Does it even matter what they call it?

You will commonly hear a recession defined as two consecutive negative quarters of real Gross Domestic Product (GDP). While it is true most recessions in the past have contained two consecutive quarters of negative GDP, not all have (the recessions in 1960 & 2001 did not meet this definition). Although, it is also true that since 1950 every period that has contained two consecutive quarters of negative GDP have overlapped with periods that have ultimately been determined to be recessionary periods.

The reality is that in the US recessions are ultimately dated by the National Bureau of Economic Research (NBER). The NBER defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months”. Some of the important economic data points beyond GDP that go into that determination are industrial production, retail sales, jobs and personal income adjusted for inflation.