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Tackle Today: About that 2020 Recession

July 22, 2021

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NBER makes it official

Traders,

In the Bear Market Survival Guide, we teach about the business cycle. One of the significant players that track the cycle is the National Bureau of Economic Research (NBER). They’re not in the business of revising their decisions. Rather, they wait a lengthy period until the data indisputably supports calling for a peak or trough in the cycle. On July 19th, 2021, NBER released a statement declaring that a trough in economic activity occurred in April 2020. The previous peak was February 2020, which means we had a two-month recession.

It’s the shortest recession in history.

I find many facts surrounding what just happened fascinating. Here are two. First, you can’t wait until NBER says the recession is over before buying. April 2020 was 15 months ago! The S&P 500 has already climbed 74% since then. Economic data is backward-looking. And NBER lags it even further.

Second, if ever there was a chance where the biz cycle might lead the stock market cycle, this was it. The shortest recession in history gave economic indicators a great opportunity to rebound before the stock market caught wind of it.

But they didn’t.

Impressively, the S&P 500 continued its streak of troughing before the economy. It bottomed on March 23rd.  Let this be a reminder to you economic data junkies. Price leads. Forever and Always.

#TeamTackle


Chart of the Day

The Unemployment Rate and Recessions

Today’s chart displays all recessions dating back to the 1940s. We now have a new shaded sliver on the board! It’s itty-bitty and speaks to the unprecedented speed of the decline and recovery. 


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