I’m not saying we are either, although no one knows for sure. I have no idea where the S&P is going.
It’s important to know that recessions are a lagging indicator. The stock market declines before a recession, and starts rising in the middle of it. You can see this in the charts in Ahead of the Curve.
Roubini writes that the market peaks 9 months before a recession, and recovers about 5 months before the recession ends. This is because the equity market is forward looking.
The peak to trough resulted in a 28% drop in the S&P500 in the last 6 recessions, taking anywhere from 3 to 18 months to reach the trough.
Thus, if we have a recession, the S&P 500 will most likely bottom out at a little over 900.
You can read Roubini’s entire post, with charts of the past 6 recessions.
