{"id":4747,"date":"2019-11-01T00:00:00","date_gmt":"2019-11-01T04:00:00","guid":{"rendered":"https:\/\/www.whitcomb.com\/october-2019-market-insight\/"},"modified":"2022-02-07T11:42:50","modified_gmt":"2022-02-07T15:42:50","slug":"october-2019-market-insight","status":"publish","type":"post","link":"https:\/\/www.whitcomb.com\/blog\/2019\/11\/01\/october-2019-market-insight\/","title":{"rendered":"October 2019 Market Insight"},"content":{"rendered":"\n


The so-called \u201cGreat Recession\u201d ended more than 10 years ago. Since then, the U.S. economy has been in the longest recorded expansion in history. But good times don\u2019t last forever. Because you\u2019ve probably been hearing a number of predictions about the extent and timing of the next recession, let\u2019s review the facts. We\u2019re here to help you be better prepared to weather the storm when it eventually arrives.<\/p>\n\n\n\n

Anatomy of a Recession<\/strong>
The generally-accepted definition of a recession is: two consecutive quarters of economic decline as measured by GDP. (Gross Domestic Product: the total value of all goods and services produced nationally.) In other words, a recession is when the economy stops growing and starts shrinking. Recessions can come in all shapes and sizes, ranging from a tepid 6 months to an excruciating 18 months. You can learn more about the technical definition of a recession here<\/a>.<\/p>\n\n\n\n

Where Are We Now?<\/strong>
To be clear, we are not in a recession. The GDP growth rate has declined from 3.1% annualized in Q1 of this year, to the current growth rate of 1.9% annualized as of Q3 2019. Positive growth has slowed down, but it has yet to turn negative (See Figure 1). Moreover, there are a number of bright spots in our economy: unemployment is at its lowest level in decades, inflation remains under control, and consumer confidence is healthy.<\/p>\n\n\n\n

\"US
Figure 1 US GDP Growth<\/em><\/p>\n\n\n\n


Is a Recession Around the Corner?<\/strong>
No one can predict when a recession will occur, but there are some signs that the economy is slowing. The ISM (Institute for Supply Management) manufacturing index, which records global manufacturing figures, revealed that the manufacturing sector started shrinking in August and continued the downward trend in September. There are fears that this weakness in the manufacturing sector may bleed over and affect consumer spending. Additionally, the yield curve inverted temporarily in August, and S&P 500 expected earnings for 2020 have fallen. We shouldn\u2019t ignore possible signs of an economic slowdown, but we can\u2019t think the timing of a recession is always predictable.<\/p>\n\n\n\n

How Bad Will the Next Recession Be?<\/strong>
Because the most-recent recession of 2008 was so devastating, we tend to think the next recession will be the same. However, since the late 1940s, there have been eleven recessions averaging 11 months in length. The surprising average return of the S&P 500 during the recessions? Only -1.5%. (Some of those recessions even saw positive returns in the market.) The next recession could be an extended and painful downturn, but it\u2019s also possible that it could be a relatively-mild pullback.<\/p>\n\n\n\n

How Do I Prepare?<\/strong>
There are steps you can take to reduce the effect any recession will have on your financial life:<\/p>\n\n\n\n