When does a correction become a recession?

Discussion in 'Trading' started by Cuddles, Oct 15, 2018.

  1. Cuddles

    Cuddles

    Honestly curious what metrics to go by. Gotta stop the bleeding somehow.
     
  2. fan27

    fan27

    When you blow out your account and have to go look for a "real" job.
     
    FreakofNature likes this.
  3. tiddlywinks

    tiddlywinks

    "Correction" is Wall Street jargon.
    "Recession" is part of the business cycle, in the form of economic contraction or slowdown.

    No band-aid for you.
     
    Clubber Lang likes this.
  4. eurusdzn

    eurusdzn

    The cost of money seems to have a lot to do with how much money you can use.
    Credit is important.
    The chang(ed/ing) cost of money can effect the demand of things.
    Prices, relatively, may look more expensive than they did with easier credit.
    Growth , an amazing thing, taken for granted is required to justify discounting forward
    expansion.
    Contrast monetary policy of 2009 - 2013 to now.
    Yeah, yeah, yeah... is the mantra as the search for the real reasons, the truth, the
    Answer , continues.
     
  5. Cuddles

    Cuddles

    https://seekingalpha.com/article/4173195-recession-accompany-stock-market-correction
    https://www.investopedia.com/terms/r/recession.asp

    Recession Predictors and Indicators
    There is no reliable way to predict how and when a recession will occur. But, according to many economists, there are some generally accepted predictors that. when they occur together, may point to a possible recession. First, asset prices will begin to decline. This includes home prices and other financial assets like stocks. Another possible predictor is unemployment; generally speaking, a three-month change in the unemployment rate and initial jobless claims will point to a recession. An inverted yield curve is also another predictor. When long-term yields fall below the short term ones (the 10-year vs. the 3-month Treasury securities), a recession will occur. Conversely, a positively sloped curve (in the opposite direction) will signal inflationary growth. Since 1970, all the recessions that have taken place in the United States up through 2017 have followed an inverted yield curve.

    Aside from two consecutive quarters of GDP decline, economists assess several metrics to determine whether a recession is imminent or already taking place. These indicators are divided into two categories: leading indicators and lagging indicators. Leading indicators materialize before a recession is officially declared. Perhaps the most common leading indicator is contraction in the stock market. Declines in broad stock indices, such as the Dow Jones Industrial Average (DJIA) and Standard & Poor's (S&P) 500 index, often appear several months before a recession takes shape. This was the case in 2007 in the United States, when the market began declining in August, four months ahead of the official recession in December 2007.

    Lagging indicators of a recession include the unemployment rate. Though the Great Recession began in December 2007, the unemployment rate still indicated full employment — a rate of 5 percent or lower — four months later. The unemployment rate began declining in May 2008 and did not recover until several months after the recession ended in June 2009.
     
  6. when it's no longer a pullback...
     
  7. tommcginnis

    tommcginnis

    The two are nearly unrelated.

    As noted, a correction is a financial market convention ("a 10% drop"), and might occur multiple times in any year.

    A recession is two consecutive cites of negative GDP, which may occur twice in a generation.

    So, about every 20 corrections, there may be a recession that year.

    That's not something on which to base investing/trading.
     
    rb7 likes this.
  8. "Correction" and "recession" are only vaguely related.

    Correction is a market term.

    Recession is an economic term.

    May be concurrent, but not necessarily.
     
  9. Handle123

    Handle123

    When your neighbor blows out his account and loses his job, that is a correction.
    When YOU blow out your account and loses your job, that is a recession.