Are we in a recession? Google that and see how many different answers come up for you. Technically speaking, with two consecutive quarters of declines in GDP we could be. However, there is a panel of “experts” who look at a wide variety of factors to make the official call of “recession.”
A few of my favorites:
Men’s underwear index
In this theory, men are willing to bypass the purchase of new boxers if we are truly in a recession.
You’re not running out to buy Ace of Spades if we are in a recession.
Diaper Rash Index
You’re willing to change your baby less often to save money on diapers. The trade off? You have to buy more rash cream because you left the wet diaper on too long.
The market is always forward looking. There’s not a set amount of time that I can point to but if this panel of experts does call an official recession, I don’t think that will come as much of a shock to the markets. It’s been part of the downturn we have seen since January 1st. Just like we don’t know if we are truly in a recession, we don’t know when the market will decide the sell off has been enough.
I’ve written this before but looking back at the last two major market crises, I think many of you would be surprised to know when the bottom actually occurred. During the financial crisis the market bottomed out on March 6, 2009. That was well before the recession was called over in June of that year and well before the economy was back to full strength. During the pandemic, the bottom occurred on March 23, 2020. We were all still locked in our houses during that time.
Are there still issues looking ahead? Yes, inflation is still soaring but maybe starting to simmer…slightly. There is still a war going on that nobody talks about along with new geopolitical tensions over China and Taiwan. Earnings have been a mixed bag with some tech companies (looking at you Meta) taking a beating yet other tech companies like Apple still reporting solid earnings.
As painful as the 2nd quarter statements were to look at, the S&P rose 9.1% in July, the largest monthly gain in two years. Again with a forward looking market, the strength of the labor market, a continued drop in inflation, solid earnings from our most well know corporations and a rate adjustment by the Fed all could be enough to make June the bottom of our market.
The media will always use scary words like “recession” and “stagflation” to keep those click rates up. However, it’s important to remember there is always more to the story than you’re reading. As always, if you have any questions don’t hesitate to reach out.
Feel free to share this with anyone who might benefit.