💣📉 US RECESSIONS vs STOCK MARKET (SP500) 📉💣
The likelihood of a recession [see why: https://jjplindex.blogspot.com/2025/03/phantom-of-recessionary-opera.html ] calls for an analysis of how the stock market has performed in the face of such a situation. Between 1900 and 2025, 23 recessions have been documented, averaging ~21 months (before 1945) to ~10 months (after 1945), the worst being the Great Depression (1929-1933) and the fastest being the COVID-19 recession, with a sharp drop in GDP (however, it was induced and artificial to restructure monetary policy [see why: https://www.blackrock.com/corporate/insights/blackrock-investment-institute/publications/global-macro-outlook/august-2019 ]). A summary of them is provided below:
DURATION | MONTHS | GDP DECLINE | PEAK UNEMPLOYMENT | CONTEXT:
💣 Sep 1902 - Aug 1904 | 23 | ~2–3% | N/A | "Rich Man's Panic" after stock market crash.
💣 May 1907 - Jun 1908 | 13 | ~10–12% | N/A | Panic of 1907; banking crisis led to Fed creation.
💣 Jan 1910 - Jan 1912 | 24 | ~3–5% | N/A | Mild slowdown post-1907 panic.
💣 Jan 1913 - Dec 1914 | 23 | ~5–7% | N/A | Pre-WWI downturn, later aided by war exports.
💣 Aug 1918 - Mar 1919 | 7 | ~2–3% | N/A | Post-WWI transition to peacetime economy.
💣 Jan 1920 - Jul 1921 | 18 | ~6–8% | ~11.7% | Sharp postwar depression with deflation.
💣 May 1923 - Jul 1924 | 14 | ~3% | N/A | Mild recession in manufacturing/construction.
💣 Oct 1926 - Nov 1927 | 13 | ~2% | N/A | Minor downturn with limited impact.
💣 Aug 1929 - Mar 1933 | 43 | ~26.7% | ~25% (1933) | Great Depression; stock crash, bank failures.
💣 May 1937 - Jun 1938 | 13 | ~10% | ~19% | Recession within Depression; policy tightening.
💣 Feb 1945 - Oct 1945 | 8 | ~11% | ~5.2% | Post-WWII demobilization slump.
💣 Nov 1948 - Oct 1949 | 11 | ~1.7% | ~7.9% | Mild postwar adjustment.
💣 Jul 1953 - May 1954 | 10 | ~2.6% | ~5.9% | Post-Korean War; Fed tightening.
💣 Aug 1957 - Apr 1958 | 8 | ~3.7% | ~7.4% | Manufacturing decline, Asian Flu impact.
💣 Apr 1960 - Feb 1961 | 10 | ~1.6% | ~7.1% | Mild industrial slowdown.
💣 Dec 1969 - Nov 1970 | 11 | ~0.6% | ~6.1% | Fed tightening amid Vietnam War inflation.
💣 Nov 1973 - Mar 1975 | 16 | ~3.2% | ~9% | Oil crisis and stagflation.
💣 Jan 1980 - Jul 1980 | 6 | ~2.2% | ~7.8% | Brief downturn from high inflation, Fed hikes.
💣 Jul 1981 - Nov 1982 | 16 | ~2.7% | ~10.8% | Severe recession; Volcker’s inflation fight.
💣 Jul 1990 - Mar 1991 | 8 | ~1.4% | ~7.8% | Gulf War oil shock, credit crunch.
💣 Mar 2001 - Nov 2001 | 8 | ~0.3% | ~6.3% | Dot-com bubble burst, 9/11 attacks.
💣 Dec 2007 - Jun 2009 | 18 | ~5.1% | ~10% (Oct 2009) | Great Recession; subprime mortgage crisis.
💣 Feb 2020 - Apr 2020 | 2 | ~10% (31.2% annualized Q2) | ~14.7% (Apr 2020) | COVID-19 pandemic lockdown; shortest recession.
As can be seen in the chart, in some cases, these are unrelated to the magnitude of the SP500 decline. What's notable is that, since World War II, recessions have been less frequent. This could be due to monetary unification with the US dollar. The challenge is to imagine a system where Russia and China also seek relevance and a significant role in the financial system. This could be complex for the world, as their debt and derivatives markets are underdeveloped and offer little certainty due to their autocratic nature. However, they are an important part of the supply chain.
Another point worth highlighting is that during neoliberalism (1990–2020), there were only four recessions, compared to eight during the era of nationalism (1945–1989). Furthermore, the nationalist wave was also characterized by higher inflation rates and long-term backwardness due to a lack of technological transfers.
Predicting market behavior is technically impossible, as it depends on expectations, which can be manipulated. Nevertheless, there are cycles that can remind us of analogous historical processes, making some events similar, but not identical. What we know is that the world is moving toward more nationalist and protectionist structures, political and religious fanaticism, secessionist movements, and an increase in poverty thanks to the liquidity trap of public spending. What is going to happen?
The best analysis is yours!
J. Joel Padilla
Copyright: Joel Padilla 2025
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