Sometimes recessions come on quickly, like with the OPEC oil shock, or the 2008 housing fiasco, or the sudden appearance of Covid. Most times, though, it takes a while for the rock to work it’s way through the snake: it’s a little thing here, a mismatch there, some layoffs over here, a few more over there, and before you know it: you’re in a recession.
I went back and looked at the DOW from ‘99 to 2003. (Admittedly the Nas might have been better, but the DOW is a little more broad market. Anyway…)
It took a full four years of “red” before the market turned up. Sure, there were ups and downs along the way, but it was a long, slow slide before things brightened up.
I think here we’re watching the “red” closely because we’re attuned to it, and we’re expecting whatever we’re expecting to happen quickly. Adult onset ADHD or something, I dunno.
Anyway, absent some sort of massive “shock”, I expect this long slow grind to continue. We, and when I say “we” I mean the financial press, an entire generation of young traders, and us - we’ve been conditioned to expect “ever upwards”, coming off a full decade of prosperity after 2008, what with 0% interest rates helping it along for so long, the years between OPEC and the tech bubble were a lovely long stretch of niceness.
Historically it hasn’t been that way; recessions in the past have been much more frequent, sometimes deeper and harder to climb out of, and that was when the US had an economy the envy of the world and could do pretty much anything we wanted. Times are different.
Maybe there will be shock that scares traders and the rest out of the market: a big earthquake, China taking Taiwan, an assassination here or there; any number of things could qualify. But that said: we’re at the top of the bunny slope, and we have an extended ride down ahead of us. I think.
