Recession
A meaningful, broad contraction in economic activity.
Loosely defined as two consecutive quarters of falling GDP, though official bodies use a broader judgement including employment and income.
Crucially, the stock market is not the economy. Shares typically fall before a recession is declared and start rising again while the news is still uniformly awful, because prices reflect expectations rather than the present.
The market moves first, and recovers first
Shares fall before the data does and start climbing while the news is still uniformly awful. Waiting for the news to improve means buying after the recovery has happened.
Waiting for the economic news to improve before investing means buying after the recovery has happened.
Selling because a recession has been announced. By then, the market has usually already priced it.
Related terms
See Recession on a real company
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