Currently, everyone is questioning if US it is in recession or not.
I am not an economic expert and I don't know what will happen in the next recession, but we can analyze what happened in the previous recessions.
The formal recession definition is
a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
During a recession, the country economy struggles, people start to lose work and companies sales less.
Now, that we have the recession definition, let's see what happened in the previous recessions.
This is qualified as one of the worst recessions in the US.
As we can check in the chart, this recession had a duration of 22 months and the market drop 25%. The market started to recovered 15 months from the recession start.
This recession, it was caused by FED when they raised the interest rates to fight inflation.
But high interest rates made a lot of pressure on some economy sectors that had dependency from borrowing money, like construction or manufacturing.
The 90's recession it was a "quick" recession, with a quick V-shaped recovery, that had a duration of 9 months, but the market dropped 25%.
This recession, it was caused by several reasons like pessimistic consumers due to the last recession debts, the increase of oil price after Iraq invaded Kuwait, a crisis to secure credit due to overzealous banking regulators and again FED trying to lower the inflation rate.
The Dot-com bubble it was the worst market recession from all time even if the duration was "only" 8 months, the market dropped 71% and needed between 7 years (S&P500) and 14 years (NASDAQ) to recover.
What led to this recession was the fact that during the 90's many US technology companies listed on the stock exchange were overvalued creating a bubble and the Fed to try to protect the market from this situation increased the interest rate several times.
This recession was due to a mortgage crisis due to banks being over-rated mortgages and lending on these ratings. This recession is called "The Great Recession" because several banks, investment funds and insurance companies have had liquidity problems.
This recession had a duration of 18 months and the market dropped 55% however for the market recovers it was necessary 4 years.
The Congress approved a $700b bank bailout, followed by $787b economic stimulus package implemented to avoid a global depression.
This was not a real recession, it was a short crash due to a global pandemic (market dropped 35%).
The Government implemented unprecedented monetary policy, giving money for everyone that makes the market recover fast (6 months)
Every time that FED increases the interest rates to control the inflation rate, we can say a recession starts taking in consideration historical data.
The big problem is the fact that we don't know how much time will be needed to go out of recession and market to recover and meanwhile people will have a lot of issues related with inflation on necessities and also because of the unemployment it could create.
