Bear market raises recession fears

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Concerns about a recession are on the rise as the stock market tumbles into some hairy territory.

The S&P 500 on Friday briefly entered bear market territory, a term that means that an index has dropped by at least 20% from a recent high. After recovering slightly Friday afternoon, the S&P 500 has fallen just under 19% since the start of the year, its most recent peak.

Desmond Lachman, a senior fellow at the American Enterprise Institute, said that while stock market declines don’t always portend a recession, the sheer volume of the individual wealth that has been wiped out in recent months raises serious concerns. A recession is defined by the National Bureau of Economic Research, a private academic group, as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Some see it as two consecutive quarters of negative GDP growth.

Richard DeKaser, executive vice president and chief corporate economist at Wells Fargo, told the Washington Examiner that his firm’s economic model projects a 30% chance of a recession occurring in the next six months alone. The half-point hike is akin to two rate increases at once and signals that the Fed is increasingly worried about the country’s breakneck inflation. The last time the central bank took such an aggressive tack was more than two decades ago.

 

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