Does A Violent Selloff Really Mean A Recession Is Coming?

Only one word can describe the way the market has been behaving over the past few weeks- volatile.

After huge losses in equities (on Monday, August 8th, especially) whispers of recession are getting louder and louder all over the market. But according to The Economist, a one day blood bath may not necessarily mean we’re heading for dark days.

Via The Economist:

In almost all big market falls since 1951 (when quarterly GDP figures began) the crash has come in the midst of an economic recovery. In most cases, economic growth continued for several quarters after the crash, with the notable exception of the market collapse in October 2008, which was followed by recession.

So investors can go ahead and worry about other things- austerity, bad policy, the continued over-valuation of stocks- but not about the correlation between sell-offs and recession.

Here’s the chart:


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