Experts from LPL Financial, the largest independent broker-dealer in the United States, said the longest bull market in the history of traditional finance has been completed. It is reported by CNBC.
However, according to analysts, the beginning of a bear market does not mean the onset of a recession. Nevertheless, the latter happens in most cases after a reversal of a long-term trend.
The last three bear markets went into recession.
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The S&P 500 and Dow Jones Industrial Average completed the 11-year bull rally this week, down 20% from their highs.
The stock market is a kind of leading indicator anticipating a slowdown in the global economy. However, any indicator does not always work.
For example, on the notorious “Black Monday” of 1987, the S&P 500 hit 22% per day, but the subsequent bear market lasted only 4 months and did not result in a recession in the US economy. For comparison, on Thursday the S&P 500 fell by 9.5% and this was the deepest daily fall of the “barometer of the American economy” since 1987. Bear markets of 1961, 1966 and 1947 also did not go into recession.
70% chance
On the other hand, historically most bear markets – over 70% – have been accompanied by a recession, according to the LPL. In particular, this has been the case in recent decades – in 1990, 2000 and 2008.
Some economists are confident that the recession will last only a few months and the US will be able to avoid a technical recession. For example, JPMorgan expects business activity to recover in mid-2020, after a slowdown in the spread of coronavirus.
Remain moderate optimism and experts of Bank of America.
“We believe that in the coming months, the economy will“ flirt ”with the recession. A negative indicator of GDP will be in the II quarter, and weak growth will begin in III, after which recovery will begin ”– said the chief economist of the bank Michelle Mayer.
A recession is usually considered a fall in GDP for two consecutive quarters. However, the National Bureau of Economic Research may call the recession a recession that lasts only a few months. At the same time, the department draws attention to other economic indicators, such as the dynamics of real incomes of the population, the level of employment, industrial production and wholesale and retail sales.
Recall that the institutional activity on CME decreased shortly before the cryptocurrency market crash.
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