The bear market we are in the middle of right now in the U.S. could very well be followed by a major recession, if historical precedents are any indication, according to Neil Howe, managing director of demography at Hedgeye Risk Management.
When it comes to bear markets and recessions, “generally, one does lead into another” historically, he said Thursday during a COVID-19 pandemic update webcast by the firm.
However, there have been exceptions, he was quick to add. One notable exception was the Kennedy Slide of 1962 (also known as the Flash Crash of 1962) from December 1961 to June 1962, he said, noting: “That was a pretty serious bear market. It went down 29%.” However, it did not lead to a recession, he told viewers, noting there was a “very strong economic recovery,” driven by high demographic and productivity growth.
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Another exception was the bear market in 1966, he pointed out, noting that was “the one instance where we had an inversion of the yield curve but did not have a recession.” That was despite the fact that it did have a big effect on the economy as growth slowed, including “almost to absolute zero” in one quarter, he said.
The other standout “false alarm would clearly be” the “very sudden crash” of 1987, but there was a “pretty steady recovery” that followed it, he said.