“There’s been a lot of speculation lately about whether the US is currently in a recession or headed for a recession,” he told TheStreet. “Based on the conventional definition of a recession, which is two consecutive quarters of negative GDP growth, we are currently in a recession.”
That doesn’t mean the market can’t redefine what a recession looks like, especially when it hits conditions that are largely unprecedented — such as a more than two-year pandemic, record low unemployment and 40 years of high inflation.
“Some argue that this time is different, pointing to the strong labor market and rising wages as proof that we are not in a recession,” Samuelson said.
To avoid a recession and all the policy making and safeguards and investor fears that come with it, the market and its regulators need to pay close attention to certain benchmarks.
“If we avoid a recession, the average bear market decline is 25% over a 7-month period, which we hit at the low of June 17 this year,” said Samuelson. “Markets typically go through a bottoming process that includes a retest of the lows. If we go back and retest the June lows, that’s down 14% from today’s close.”
Mayra Rodriguez Valladares, managing partner at MRV Associates, a financial consulting firm that offers training and research, agreed, saying the horizon may darken as America faces an uncertain fall.
“From a manufacturing point of view, we are already in a mild recession in the US. However, the labor market remains very tight,” Valladares, who specializes in banking and capital market risk, told TheStreet.
Samuelson said that while “the jury is still out on whether we will have a recession,” the National Bureau of Economic Research (NBER) has always declared one after two consecutive quarters of negative GDP growth.
“It’s also possible that the recession will be milder than average given the strong labor market and the Fed’s apparent willingness to let the unemployment rate climb alone to the low 4.0% versus 3.5% currently,” he said.