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The Longest Expansion Is Over

Did the US economy go into a recession last month? According to the National Bureau of Economic Research (NBER) the answer is no, but we think there’s a good chance that will be revised after the fact to show the economy did indeed begin a recession in March 2020.

This, of course, ends the longest economic expansion in our country’s history, at 128 months of growth and a 50% increase in nominal gross domestic product (GDP) over this 10-plus-year period.

This will be the 13th recession since World War II, with the average recession lasting 11 months on average, and the shortest ever only six months in 1980. The last recession during the Great Recession lasted 18 months, which was the longest since the Great Depression in the 1930s.

“This recession isn’t like any we’ve seen before, as the economy was in good shape before virtually stopping in its tracks,” explained LPL Financial Senior Market Strategist Ryan Detrick. “Also, this was the first recession we’ve ever seen where the government technically caused it, by putting in place all of the social distancing restrictions to limit the potential long-term fallout.”

As bad as the data will be in the second quarter, thanks to the dual benefit of record monetary and fiscal stimulus, we believe once we can get past the worst of the COVID-19 pandemic, the stage is set for a potential economic boom later in 2020. In other words, this recession very well could be less than 6 months, making it the fastest recovery in history. Now let’s be clear; you can’t simply stop the world’s largest economy and expect it to start right back up again, but a big improvement later this year is our base case.

What will be the first clues to when the economy is indeed turning? Historically, the stock market actually bottoms well before the economy, and we expect that to happen once again. As shown in the LPL Chart of the Day, the S&P 500 Index has bottomed about 5 months on average before recessions were deemed over. Only the recession after the tech bubble 20 years ago saw the stock market bottom after the recession was over, and that was likely due to the excessive valuations that built up during the late-1990s coupled with the blow to investor confidence from the Enron and Worldcom accounting scandals.

For more of our immediate market thoughts, please listen to the latest LPL Market Signals podcast here.


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

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This Research material was prepared by LPL Financial, LLC.

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