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One thing is that recessions aren’t as bad as people think they are. The 2008 recession was brutal but that’s not how they all are. I think since everyone remembers the most recent one and the devastation it caused, they think future recessions will be like that. An average recession lasts about a year and a half. An average recession has peak unemployment at 6-8%, while the great recession had peak unemployment at 10%.
However, we have had an extremely long bull market so it follows that a relatively strong recession may be impending. Has our weariness protected us or pulled back the bullishness of the market? Time will tell.
Remind me in 3 years.
Edited: Switched bear->bull
Whether it’s 3 months or 3+ years away I think we can anticipate the selling to be like that of Feb 2018 and Q4 2018. Violent downside with ballooning volatitly. Because of that, I think the next true bear market (as they typically precede recessions from my research) will be fast and violent but consequently short lived. As mentioned, the investor exuberance isn’t really there. I’m about 30 and most people my age roll their eyes when I talk market (their loss really, as they should truly give a damn at our age and put some skin in the game but that’s them).
Every recession is different. The sickness right now is less advanced in the US because of the trump tax cuts and the current tariffs are focused on things that affect businesses and not consumers directly. The consumer feels that the economy is great, but that’s only because the malaise hasn’t translated into prices yet. They are able to substitute goods or spend on other things right now.
If you start to look at the data coming out of South Korea, Europe, Argentina, turkey, and the U.K., things are remarkably less rosy. It isn’t always about something like the mortgage market being broken, or over exuberance in tech shares. Sometimes it’s just that the tide is going out and you’re along for the ride.
Fear is what has kept me investing since 2011 or so, it reassures me that things aren’t too irrational. I try to buy the dip every time a big scare happens. Conversely, when Bitcoin was up to 20K and my friends and taxi drivers started giving me buying tips, I unwound some of my stake in that. Going against the grain has been generally a reliable strategy for me. Agree with OP, prior to the past recessions, when you start hearing about how everything’s gonna be ok, is generally when it isn’t.
As I recall, the news just before the market dropping in 2007-08 was just like it is today. Depending on who you listened to things were great or about to go sour. It took financial failures like that of Lehman and Bear Stearns to get the market fear really going.
I remember Cramer coming on TV saying “get out, now” like the day before one of those crashed. Then it was insane volatility while the govt. figured out what it was going to do. Then things got really ugly.
So back then it took some real catalysts for people to panic.