Source: Bespoke Investment Group (B.I.G.).
The correction has similarities to last August’s—a swift price decline for a market that had recently been near multi-year highs. SentimenTrader (ST) notes it’s quite rare to see this kind of severity relatively soon after trading near a three-year high—and the fact that we’re seeing another episode so close to last August’s is also rare. Looking at history, there was a binary outcome after such periods: the market tended to worsen looking ahead if a recession had already begun or was imminent. But if there was no recession, the market did decidedly better.
Every predictive recession model I have studied still suggests a low risk of recession. In fact, if we are in one or heading toward one, it would be the first time in history the leading indicators did not roll over and provide ample warning.