LPL Financial Market Signals Podcast

Bear Market Without a Recession | LPL Financial Market Signals Podcast

LPL Research

In this week’s LPL Market Signals podcast, our strategists discuss why 2019 could see a bear market without a recession.

If you look at the last 40 years, there were four times we had bear markets without a recession and three of those times stocks dropped about 20%.

- Ryan Detrick - LPL Senior Market Strategist

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In LPL’s first Market Signals podcast of 2019, the LPL Research strategists discuss the whats and whys behind the current economic climate – including a possible bear market without a recession.

First up is the Federal Reserve Bank (Fed), which was viewed in a positive light for much of 2018. However, some confusion regarding policy has led to some market volatility since October. The strategists note that they expect to see a more “accommodative” Fed in 2019, a prediction supported by recent comments from Fed Chairman Jerome Powell about the Fed being more “patient.”

The strategists also note their belief that a recession can be a self-fulfilling prophecy. As concerns over a recession mount, spending and confidence can both sink. With the continuation of strong corporate profits and the benefits from fiscal policy, the strategists state they don’t see a recession in 2019.

History has shown that it’s possible to have a bear market without a recession. In the last 40 years there have been four bear markets in non-recessionary environments; three of those stopped right near 20%.

Finally, the LPL strategists point out that the fundamental backdrop remains strong. Recent manufacturing data came in weak, but is still expanding. More than 300,000 jobs were created in December, and inflation continues to be quite contained. This is a backdrop that fully supports GDP growth of at least 2.5% in 2019.

Chart - Not all bear markets are equal

Bear markets tend to be worse when accompanied with a recession.

For the full rundown of what our LPL strategists have to say about the outlook for 2019, tune into the Market Signals podcast. And read FUNDAMENTAL: How to Focus on What Really Matters in the Markets for the full 2019 financial outlook publication.

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