No. Some numbers will be notable as low points for a specific period, or if we have a notable percentage drop, but the DJIA is not a recession indicator on its own.
no because whether there is a recession is a matter of a opinion and there is not always agreement. once a critical mass of experts agree then it’s generally seen as being in a recession but it’s not there is one test and only test or viewpoint
No, a recession is defined by two consecutive quarters of negative GDP growth. Stock indexes will broadly follow economic trends, but they’re not the determining factor.
If you were going to try and read the stock market to say “well, that’s a recession right there”, as others have said, you aren’t going to find anything written down.
That being said, the markets are “sentiment driven”. If the stock brokers start shouting “my god! Something awful’s going to happen” then the bet is that the market will drop.
Put another way, (from the same source) “the markets are a balance of fear and greed. If there is more greed, the market goes up, if there’s more fear, the market goes down”.
Remember: The DJIA is an artificial number. It’s compiled from a specific (small) set of companies.
The thing is, most companies that get listed in the stock market are being run with something like efficiency. There are screwups of course but the standard thing is that a company that is listed is, definitionally, successful. When it stops being successful, it gets delisted by going broke, falling into receivership, going out of business, etc.
As a result, the DJIA trends upward. It has no other choice. Yes, in very rare events, the number drops, but the only companies that get listed are the ones that survive.
Imagine a school with 10 students. GPAs are 4.0 (2 students), 3.5 (6 students), 0.5 (2 students). That’s an average GPA of 3.0. Twenty percent of the students have a 0.5 GPA (out of a 4.0 system). But the average makes it seem like the students are, more or less, pretty with it.
Now, imagine the two 0.5 students getting expelled. The average goes up to 3.625. When their replacements arrive? Well, clearly, what the school wants is two smarter-than-average students, so they get two people whose GPAs are expected to be above 3.625. And that puts the average even higher. Meanwhile, you’ve still got those two failing students out there in the world, but they don’t count anymore for the purposes of the average.
How do you know where’s in a recession? The definition, IIRC, is two consecutive quarters of negative economic growth. The real answer? It’s a recession when the other guy loses his job. It’s a depression when YOU lose your job. This is often given as a flippant answer, but it is surprisingly accurate.
The economy is great, as long as YOU have a job. A recession? Who cares, I’m getting a paycheck every week. You’ve just been laid off? The economy is in full collapse.
The status of the stock market is not the definition of recession. We can be in a bear market or bull market or flat market during a recession, technically.
That said – bear and bull markets are somewhat correlated to recession/expansion of the economy at large.
Final note – the Dow Jones Industrial Average is NOT the stock market. It’s 30 companies. Again, it’s pretty correlated with the broader U.S. market but just to clarify – it’s a very small subset of the market.
When people say “the U.S. stock market,” they usually are referring to the S&P 500 which is an index of the 500 largest publicly traded companies in the USA. Technically, that’s still a subset of the market but colloquially that is what most commentators are referring to when they say the “US stock market.”
It’s time-based, not “a fucking idiot dropped a nuke on the economy”-based. We’ll have descended into cannibalism by the time they can call it a recession.
No. I know there are a lot of people looking at it and running around like chickens with their head cut off. Yesterday, “end of the world” was trending on Twitter. More accurate is the employment rate and, of course, two consecutive quarters of negative GDP growth others have pointed out.
Comments
No. Some numbers will be notable as low points for a specific period, or if we have a notable percentage drop, but the DJIA is not a recession indicator on its own.
no because whether there is a recession is a matter of a opinion and there is not always agreement. once a critical mass of experts agree then it’s generally seen as being in a recession but it’s not there is one test and only test or viewpoint
No, a recession is defined by two consecutive quarters of negative GDP growth. Stock indexes will broadly follow economic trends, but they’re not the determining factor.
No. Donald trump just needs to be in office to know things are HORRIBLE and doom is coming/here.
If you were going to try and read the stock market to say “well, that’s a recession right there”, as others have said, you aren’t going to find anything written down.
That being said, the markets are “sentiment driven”. If the stock brokers start shouting “my god! Something awful’s going to happen” then the bet is that the market will drop.
Put another way, (from the same source) “the markets are a balance of fear and greed. If there is more greed, the market goes up, if there’s more fear, the market goes down”.
By that metric, there’s a lot of fear right now.
Yes when it goes to zero we are definitely in a recession.
Recession is defined as Economic contraction.
Specifically 2 consecutive quarters of negative GDP growth
Dude, if we based a recession off of the stock market we’d be so fucked. The stock market is all based on speculation.
Remember: The DJIA is an artificial number. It’s compiled from a specific (small) set of companies.
The thing is, most companies that get listed in the stock market are being run with something like efficiency. There are screwups of course but the standard thing is that a company that is listed is, definitionally, successful. When it stops being successful, it gets delisted by going broke, falling into receivership, going out of business, etc.
As a result, the DJIA trends upward. It has no other choice. Yes, in very rare events, the number drops, but the only companies that get listed are the ones that survive.
Imagine a school with 10 students. GPAs are 4.0 (2 students), 3.5 (6 students), 0.5 (2 students). That’s an average GPA of 3.0. Twenty percent of the students have a 0.5 GPA (out of a 4.0 system). But the average makes it seem like the students are, more or less, pretty with it.
Now, imagine the two 0.5 students getting expelled. The average goes up to 3.625. When their replacements arrive? Well, clearly, what the school wants is two smarter-than-average students, so they get two people whose GPAs are expected to be above 3.625. And that puts the average even higher. Meanwhile, you’ve still got those two failing students out there in the world, but they don’t count anymore for the purposes of the average.
How do you know where’s in a recession? The definition, IIRC, is two consecutive quarters of negative economic growth. The real answer? It’s a recession when the other guy loses his job. It’s a depression when YOU lose your job. This is often given as a flippant answer, but it is surprisingly accurate.
The economy is great, as long as YOU have a job. A recession? Who cares, I’m getting a paycheck every week. You’ve just been laid off? The economy is in full collapse.
Yes but I’m not sure what that number is and it keeps changing
Two things here.
The status of the stock market is not the definition of recession. We can be in a bear market or bull market or flat market during a recession, technically.
That said – bear and bull markets are somewhat correlated to recession/expansion of the economy at large.
Final note – the Dow Jones Industrial Average is NOT the stock market. It’s 30 companies. Again, it’s pretty correlated with the broader U.S. market but just to clarify – it’s a very small subset of the market.
When people say “the U.S. stock market,” they usually are referring to the S&P 500 which is an index of the 500 largest publicly traded companies in the USA. Technically, that’s still a subset of the market but colloquially that is what most commentators are referring to when they say the “US stock market.”
I believe we could actually officially be in a depression before officially being in a recession if stuff drops fast enough.
Not sure about a recession, but CEOs say they’ll grow a backbone right after a 20% market crash.
“CEOs Don’t Plan to Openly Question Trump. Ask Again If the Market Crashes 20%.”
https://archive.ph/wGNK3
It’s time-based, not “a fucking idiot dropped a nuke on the economy”-based. We’ll have descended into cannibalism by the time they can call it a recession.
No. But a great time to buy stocks. Like a kid in the candy store.
No. I know there are a lot of people looking at it and running around like chickens with their head cut off. Yesterday, “end of the world” was trending on Twitter. More accurate is the employment rate and, of course, two consecutive quarters of negative GDP growth others have pointed out.