Crazy market selloff doesn’t signal a recession


Nicole Sinclair | Yahoo News | January 21, 2016

The almost 10% decline in U.S. stocks so far this year—clocking in at the second-worst start to the year since 1929—has amped up concern among some investors about the R word: recession.

As Goldman Sachs highlighted in a research note Thursday, large selloffs do not necessarily signal recessions, technically defined as two consecutive quarters of negative economic growth as measured by GDP.  Goldman cited the 19% decline in the S&P 500 between July and October of 2011 — which did not coincide with or precede a recession — as an example.

Nonetheless, commentary surrounding a coming recession has increased. This is despite steady, albeit slow, GDP growth since the recovery began in mid-2009. Bloomberg median consensus estimates for 2016 stand at 2.4%.

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