Recession

A recession is a macroeconomic contraction characterized by declining GDP, rising unemployment, falling consumer spending, and reduced business investment. While the popular shorthand is "two consecutive quarters of negative GDP growth," the official determination in the U.S. is made by the National Bureau of Economic Research (NBER), which considers multiple indicators including employment, industrial production, real income, and wholesale-retail sales. Recessions are a normal part of the business cycle and have occurred roughly every 5-10 years historically. They vary greatly in severity — the Great Recession of 2007-2009 saw GDP decline by 4.3% and unemployment peak at 10%, while the COVID-19 recession of 2020 was the deepest but shortest on record (2 months). Recessions typically cause bear markets in stocks, declining corporate earnings, rising credit spreads, and falling commodity prices. However, they also create opportunities: the Fed usually cuts rates aggressively, bond prices rise, and stocks purchased during recessions have historically delivered strong long-term returns. Leading indicators like the yield curve, manufacturing PMI, and consumer confidence can signal approaching recessions months in advance.