Market Blog

The ‘R’ word scare – Recession

Currently, “Recession” is the most discussed topic among economists and traders alike. While some say we are about to hit a recession far worse than 2008, some believe that the recession is almost about over.

Boom and bust have been an integral part of the economic cycle. For every 4 to 7 years of bull Market, we have experienced a bear at an average of 14.4 months (since 1900). We already witnessed a ‘ Market Correction’ in 2015. Though technically, we do not have 2 straight quarters of negative GDP yet, we are witnessing an earnings recession in the U.S. We have a fourth straight quarter of negative sales for S&P 500, According to FactSet, the longest since 2008. While the government has announced that the employers added about 242000 workers, many remain skeptical about the numbers. Since we are in an earnings recession, many companies have cut jobs. According to CNN money, compared to December 2015, January 2016 job cuts were up by 216%! These are bound to show up in the numbers soon enough. And then, people would spend lesser, companies would have even lower sales, thus lesser profits (read:more losses), more job cuts, and thus the vicious cycle would continue. (The paradox of thrift)

What may be the possible recession catalysts?
Well, there are numerous possibilities. Be it Global slowdown, The oil crisis, Chinese stock market turmoil , the still unresolved Euro-crisis, the end of petrodollar regime, rising Student loan debts, to a U.S. economic slowdown, or it may be something totally un-thought of! It’s as though the bubble is there, just waiting for a pin prick.

The question is, Are we ready for the recession? If we are in a recession starting today, assuming the bear continues for the next 14-15 months, are we prepared for it?


Disclaimer: The information contained within this blog contains segregated views of analysts and the author’s opinions and is provided for informational purposes only. It not intended as professional financial advice. See http://stockal.com/legalities/

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