Quick Take: Recession vs. Bear Market

A Recession and Bear Market may go hand-in-hand, but are associated with different issues.
By Morningstar |  25-09-22 | 
 

When is a recession not really a recession?

When it’s a “rolling” recession.

A rolling recession occurs when different segments of the economy slump at different times, resulting in very low overall growth in gross domestic product output. By maintaining the barest minimum of growth and avoiding a sharp and prolonged economic contraction, rolling recessions sidestep being labeled as official recessions. Rolling recessions are also referred to frequently as “growth” recessions.

“It’s putting the best face on a recession. There will be some growth in GDP output, but it will be so low that to businesses and households it will feel like a recession," explains Kenneth Kim, senior economist at KPMG, the multinational tax and accounting services firm.

Do recessions and bear markets go hand-in-hand?

Although the two often go hand in hand, they are associated with different issues.

A recession describes a slowdown in economic output and is generally defined as at least two consecutive quarters of decline in gross domestic product, or GDP, which functions as a measure of economic health.

A bear market describes a stock market decline that may be a result of negative investor sentiment. If investors are concerned about falling returns, they may be more inclined to sell rather than buy stocks. A selloff can then trigger further pessimism about market performance, acting as a negative feedback loop that sends the market into decline.

The stock market is not the economy; the market may be up even as economic output is down.

The above has been taken from:

What is a rolling recession?

Bear Market vs. Economic Recession

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