We all know another recession is coming eventually. It’s part of the natural business cycle. The real question though, is how bad will the next recession be? Can we expect something as bad as the 2008 recession?
The short answer is most likely not. Overall, the 2008 recession was “generally terrible”. A typical recession will see a 30% drop in the S&P, while the 2008 recession saw around a 50-60% drop. We also saw a huge hit on GDP in 2008, 5.1 percentage points. In the past, we have seen GDP hits around 2.7 percentage points, 1.4 percentage points, and 0.3 percentage points. That 5.1 percentage point dip was major.
It is also possible that we are already in a recession right now. There is a lag as economists wait for data to measure GDP, so it is possible that we are in a recession that just isn’t affecting a lot of people or businesses.
The best thing to do, to make sure the next, or current, recession isn’t that bad, is to try not to worry too much. That sounds counterintuitive, however low consumer confidence can cause business to pull back, and cause people to save money rather than spend, thus causing a recession.