ROCHESTER, N.Y. – President Donald Trump’s latest round of tariffs have sent stock market indicators across the globe into a freefall and some economists say the tariffs could lead to a recession.
Economists say a recession is one of the stages in an economy’s life cycle of growing and shrinking. The signs of a recession indicate “negative growth,” unemployment rises and businesses slow down. Most agree this has to happen for six months or two economic quarters to get that recession label.
The National Bureau of Economic Research has officially declared each recession since the ’70s. Recessions are famously hard to predict ahead of time because when you’re talking about something as big and complicated as an economy, no one knows what incoming current event could shake it all up.
The pandemic spurred a brief recession that ended fast. However, 2008 was a bit of a different story, much longer. But recession periods are followed by recovery and then, again, eventual growth.
That’s the life cycle the economy takes. The question here is whether the tariffs will prompt industry to shift back to American shores. That’s the idea behind the Trump administration’s long-term gain plan.
But in the meantime, if we get into a full-blown recession, we may have to deal with higher interest rates, lower employment, and a stock market that stays lower.
Turning to stocks, we’ve also heard about a bear market. There’s a metric for that too, it’s usually a 20-point fall for one of those three major stock indexes, the Dow Jones, Nasdaq, or S&P 500.
They call it a bear because it’s hibernating while the numbers are low. History says bear markets can take a couple of months to a couple of years to bounce back. Many advisors say if you can ride it out, otherwise you guarantee yourself that loss.
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