Gorgeous recession chart porn, via Fidelity.

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Hat tip:  Financial Philosopher:

Category: Economy, Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Stock Market Performance During Recessions”

  1. John Borchers says:

    Notice we are above the average recession length already. If we only have a recession the market is extremely underpriced.

  2. John Borchers says:

    Remember once stocks go up banks can write up what they have on the books. So all we need is the market to go up and this will be self correcting.

  3. TrickStar says:

    Hey Barry – You’ve given credit to a blogger that copped that lovely chart from Fidelity. It’s great to see that someone is doling out credit, but I have to ask myself if the guy getting the credit is actually worthy.

    Why does this situation seem so familiar? :)

  4. Mannwich says:

    @John: If things were only that easy and simple.

    I don’t think this is going to be an average or even slightly above average recession. I hope I’m wrong but I don’t think I am.

  5. leftback says:

    Nothing is average about this situation.The rebound inflation might not be average, for example. :-)

    @ JM: I have no freaking idea what the market is going to do, but I can tell you that I looked at the VIX this morning and it looks like an absolutely massive head and shoulders after yesterday. So do SKF and SRS for that matter. Which might, and I emphasize might, mean that we are a little bit nearer to the end of this thing than some people think. Perhaps we will see a period of “dull” ± 4-5% moves intraday from now on as we meander toward the true bottom for this market, instead of ±9% swings…

    BTW, yesterday’s bond market action was NOT average and reminded me of the days of crude > $125. Surely there must have been some short covering to drive a 10% decline in yield on the day. 10 more days like that and the 10-year yield will reach zero. This is the staid Treasury market??? For everyone’s sake, I sure hope the hedgies aren’t playing around in here again… we have already seen what happens when all those tools try to exit the market at once.

  6. SWMOD52 says:

    So is the debate now how bad the recession will be? In previous recessions did we loose two Dow stocks? How many major banks failed? Morgan, Merril, Lehman and Bear all survived previous recessions. GM coulde still be out. I would think this recession will be worse than average.

  7. karen says:

    think Graveyard of the Pacific while attempting to navigate this market… and may i add the word unprecendented to leftback’s post?

  8. The Treasury, Fed, FDIC and Congress are doing everything they can to lift asset prices. It will work eventually. Their problem is they can’t control which asset prices rise greater than others. Will it be stocks, bonds, housing, energy, food, gold or something else? Just figure out which ones will rise the most and place your bets. Simple, right?

  9. Barry, thanks for the “hat tip.” What I found most useful about this chart from Fidelity, is the perspective it provides, with specific regard to guiding expectations of stock prices once the “recession call” is made (as it was yesterday).

    My perspective is that this recession and bear market are not as bad as most perceive it to be, and certainly not at Depression levels, although worse than the “averages.”

    With that in mind, an 18-month duration, which would take us to mid-2009, would sufficiently make this recession the longest in the post-war era (a justifiable distinction).

    Taking these logical assumptions further, the stock market would discount this duration six to nine months in advance, which could mean an end to this nasty bear market in early 2009.

    Of course, as you know, irrational perceptions have a way of destroying logical perspectives…

    “Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things.”~ Miyamoto Musashi

    Cheers…

  10. Mannwich says:

    I vote food in the short term.

    Eventually energy, gold and stocks but just not sure when.

  11. Mannwich says:

    To quote the inimitable Vinny Barbarino, “I’m SO confused”………

    Honestly, have no clue which way we’re headed. Time to sit this one out.

  12. CPJ13 says:

    @ leftback:

    I don’t think you can really look at SKF and SRS and use the fact that they’re potentially in a ‘head and shoulders’ configuration when they’re double inverse funds of another index. Slippage, friction due to the swaps, options, etc. that they use, as well as the fact that it’s leveraged can really skew the picture. Take, for example, IYF – which is essentially the index that SKF tracks in inverse. Nothing about the following chart exhibits anything but a nasty downward channel, certainly not a trend that looks like it’s going to reverse anytime soon.

    http://finviz.com/quote.ashx?t=IYF

    This chart is markedly different from SKF’s – any way you look at it – so I think it’s dangerous to try and make technical calls off of these double inverse triple leveraged sow cow ETF’s that are trading out there. Gotta go to the source. This source is ugly.

    Same thing with the chart SRS trades off of:

    http://finviz.com/quote.ashx?t=iyr

    Just my two cents. I don’t think you can use TA on these leveraged ETFs effectively.

  13. I remain unconvinced that markets lead by that much — more like 3 months has been my observation

  14. Short Man says:

    Baltic Dry Index hit another low multiyear low today at 684. After 9/11 the lowest it got to was around 870 and that was with at $25-$30 oil and no adjustment for inflation. The fact that we are 27% below that mark with nearly double the price of oil (input cost) is telling. The last time the index was at this level was in 1986. Markets can do whatever they want on a day to day basis but turning around the world’s economy (not just the US) is going to take years. We haven’t even begun to slow down the rate of destruction let alone position ourselves for growth.

    You can’t go wrong with buying SRS on days like today. 1/4 to 1/3 of the retailers out there are toast when xmas sales disappoint. Walmart converting middle class to upper middle class shoppers with huge success and they own their own stores. Malls/REITS = dead money.

  15. Mannwich says:

    @Short Man: Picked up some more SRS today at the close (126) and will continue to load up on big dips like this. We’ve got a long way to go before the commercial real estate mess is fixed.

  16. grumpyoldvet says:

    Barry…..good propaganda for the bottom callers though. Just like the Recession is 2 back-to-back down quarters……………

  17. jc says:

    If it’s a recession then every day is a buying opportunity, if it’s a depression then it’s different.

    BB and Paulson’s words say it’s not a depression but their actions say it is, of course they said it wasn’t a recession either…

  18. ben22 says:

    @Kent @ The Financial Philosopher

    I like your point of view only because it is up-beat, I don’t agree but it’s nice to hear something so positive. Just on a very basic level the markets, credit and equity, are not functioning in a normal way so that perspective seems far too textbook for me to buy in.

  19. Any comparison of the present moment to recessions past simply must be seen as the most glaring exercise in futility since Neville Chamberlain attempt at negotiating “peace in our time” with Hitler’s Nazi Germany.

    C’mon…

    WHEN WAS THE LAST RECESSION REQUIRING $8+ TRILLION FROM LENDERS OF LAST RESORT JUST TO KEEP THE GAME FROM SINKING INTO OBLIVION (let alone what will be needed to goose a recovery)????

    When was the last time THE ENTIRE GLOBAL FINANCIAL SYSTEM was so glaringly BANKRUPT????

    Do you really think the many various comparisons finding precedent only in the Great Depression of the 1930s is some freak accident????

    It is time to stop giving the clueless NBER any due whatsoever. “The U.S. has been in a recession since December ’07″ PUHLEASE!!!!!!

    The U.S. is plunging headlong into a Great Calamity. Get that fact through your head.

    It is bad enough we have a Treasury Secretary who will claim his schemes are meant to “protect the taxpayer.” GROW SOME NUTS, HANK. WE’RE BANKRUPT.

    It is all the worse witnessing a Congress full of cowards who will claim these schemes are meant to “save Main Street.” Save it for what? Another couple quadrillion of liabilities to be taken out of our hides in taxes?

    As you can see, I have had enough. You can go on believing our present reality bears some resemblance to “normal” circumstances past. Just don’t expect me to visit you in the insane asylum…