When Did the Recession Begin?

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Includes: DIA, QQQ, SPY
by: Henry Bee

Hugh Cleland made an interesting observation about recession and the stock market. He noted that the NBER start date of the recession in 1990 coincided with the top in the S&P 500. Using this relationship, he conjectured that the market top in October 2007 may be the start date of the recession.

However, data from the past 7 US recessions reveal that this relationship was not repeated in any of the other 6 recessions and therefore, is a mere coincidence. So when did the recession actually start?

Below are ECRI’s official recession calls in the past:

Feb. 6, 1990 by Geoffrey Moore. Lead time = 6 months.

Mar. 26, 2001 by Anirvan Banerji. Lead time = 0 months.

Mar. 21, 2008 by Lakshman Achuthan. Lead time = ?

My own speculation is that ECRI’s recession call is late this time around. There was solid evidence for a recession call in January 2008. Unfortunately, ECRI was hoping that rapid rate cuts by the Fed could help avert a recession. They did not realize that this particular recession, driven by a deflating credit bubble, would increase the time needed for monetary stimulus to work itself into the economy.

Hence, until NBER announces the official recession dates for this cycle, I will assume that it began in January 2008.