The most common definition of a recession is two consecutive quarters of declining real gross domestic product (GDP). In the first quarter of 2022, the decline was at an annual rate of 1.6% and in the second quarter, the decline came in at 0.9% down.1.
The official arbiter of recessions is the National Bureau of Economic Research (NBER) and their recession criteria depend on a lot more data than just GDP.1 To formally declare a recession, the NBER looks for a significant and widespread decline in economic activity that goes on for a while. What’s perplexing and probably why we haven’t seen an official “recession” announcement is that other economic indicators paint a different picture.2
We may very well be in a recession. However, a mixed bag of positive and negative economic factors make it hazy.
On the positive side: the labor market remains strong, still creating plenty of new jobs. Consumer and business investment is also still looking sturdy.1
On the negative side: inflation is obviously on everyone’s radar, as is the Fed’s latest interest rate hike.3
So, does it actually matter whether we’re “officially” in a recession or not? That also depends on who you ask. Policymaking economists are wary of prematurely announcing one. The possible result of panicked markets, businesses, and consumers could make it a self-fulfilling prophecy. Several Wall Street Economists think that we may not be in a recession right now; however, many have sounded the alarm that a downturn may be on the horizon.4
Bottom line: The reality of what we’re experiencing is more important than official recession calls and while it’s been a challenging year with both stocks and bonds giving back some gains, we here at Integral are looking out over the horizon. This long-term approach should be of comfort to you knowing that most recessions are short-term in nature. By taking a disciplined approach, sticking to our strategy, and taking advantage of potential opportunities when we see them, we manage your portfolio to help you reach your goals whichever way the markets move next.
Vigilantly,
Jodi & Mike
Sources & Disclosures
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