Summary
- Recessions are less frequent, but sharp market drawdowns remain common, due to rapid investor reactions and algorithmic trading.
- A ‘buy the dip’ mentality, ETF inflows, and expectations of Fed intervention drive quick recoveries and higher price multiples in the S&P 500.
- Algorithmic trading amplifies both market rallies and panics, leading to extreme volatility even for large-cap stocks, like META.
- The definition of recession is evolving, making it crucial for investors to stay resilient and recognize undervalued opportunities outside of official downturns.
Dilok Klaisataporn/iStock via Getty Images
Recessions are decreasing... but why?
The following graph is the S&P500 price…
Summary
- Recessions are less frequent, but sharp market drawdowns remain common, due to rapid investor reactions and algorithmic trading.
- A ‘buy the dip’ mentality, ETF inflows, and expectations of Fed intervention drive quick recoveries and higher price multiples in the S&P 500.
- Algorithmic trading amplifies both market rallies and panics, leading to extreme volatility even for large-cap stocks, like META.
- The definition of recession is evolving, making it crucial for investors to stay resilient and recognize undervalued opportunities outside of official downturns.
Dilok Klaisataporn/iStock via Getty Images
Recessions are decreasing... but why?
The following graph is the S&P500 price return on a log scale over the last 75 years, and the shaded areas represent the recessionary periods.
As we all know, the
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