Aug

26

Recessions

August 26, 2020 |

I went to look at past recessions beginning with the one that  officially started in Aug '1929. I looked that the number of months  the recession officially lasted for what the highest the  unemployment rate got up to was, what the lowest GDP dropped during  it, and the drop in the DJIA. there were 14 official recessions in this period (Iam not counting the current recession we are in).Interestingly, the correlation between the depth of the unemployment  rate and the number of months the recessions lasted for was .8438. In other words, the deeper the unemployment rate, the longer the  recession lasted for to a very high correlation.

The depth of GDP drop too was highly correlated to the months the recession lasted to a correlation of .75.

Every recession saw  market drop-off of varrying degrees with the  least being -5.727% from fb to october 1945, the worst -89.19% from  Aug 1929–Mar 1933 Of the 14 recessions, 10 saw market drops >20%, and 4 of those saw  drops >45 %.

So I would expect this recession to last a long tim based on unemployment and GDP so-far. However, even though all recessions saw a market drop, th severity of the market drop and the length of  months the recession lasted was only +.03. The other factors that correlated to market drop during recessions was depth of unemployment rate correlating positively by .12 to depth of market correction, and depth of GDP drop correlating positively to market  drop by .35


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