Glossary · Macro · Beginner-friendly
Recession
In plain English
A recession is a broad slowdown in the economy - jobs, spending, and business activity weaken for a while. Markets often fall early and recover before the news feels good again.
Everyday analogy: An economy catching a cold - activity slows until it recovers.
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Why it matters
Recession risk changes earnings paths, credit spreads, and defensive vs cyclical leadership - often before the official label.
A bit more detail (optional)
Definitions vary
Two negative GDP quarters is a popular shorthand; official committees use broader indicators. For investors, earnings and credit stress matter as much as the label.
Market timing
Waiting for perfect economic news often means buying after equities have already repriced the recovery.
Simple examples
Discounting the downturn
Stocks can bottom while unemployment is still rising because policy easing and eventual earnings repair get priced early.
Market leads the label
Equities fall while GDP is still positive, then bottom while unemployment is still rising - prices discount the cycle early.
Easy mistakes to avoid
- Waiting for the official call before adjusting risk
- Assuming every slowdown becomes a deep recession
- Concentrating in the most cyclical names into late-cycle strength
Remember: Prepare for recessions with process - don’t obsess over the exact label date.