What makes a recession? What's the biggest signal indicating the start of one?

[anycolour]

lol if 20% is bear, why are we 1k points above that bear? Are bears killed that quickly? How long does a bear market last on average? Just googled it, says avg is 14 months. Very similar to recession. Are recessions considered bear markets? One and the same?

 

[schizo]

We already had that in 2018. A recession is classically defined as two consecutive quarters of negative GDP, as of this typing.

But, to answer the OP's worrisome question, which is the precursor to recession? That is, which is more palpable/predictable? 20% stock market correction or two consecutive quarters of negative GDP? Without a doubt, 20% correction has almost always served as a precursor to recession.

 

[anycolour]

Not worrisome. I'm just curious and asking questions. Thank you for your answers.

More questions:

I've kind of already asked, but as you said above, a 20% correction has almost always served as a precursor to a recession. I guess keyword there is almost. Is what we're witnessing right now, a 1,000 point move above that "recession precursor" a "natural" occurrence?

In previous occurrences, how %often has there been a 50% rebound from a 20% correction? Is it normal for a 50% rebound, in this case, 1k point spike from a 20% correction to occur so fast (from Jan 2019 to Jan 2020 = 1 year)?

As an uneducated person, I would think the activity would be more towards the downside, or ranging at best, after a 20% correction - for a considerable amount of time (~1 year). But what do I know.

 

[schizo]

Is what we're witnessing right now, a 1,000 point move above that "recession precursor" a "natural" occurrence?

I'm neither an economist nor a statistician, but I know from trading the past 2 recessions (2000 and 2008) that steep stock market correction usually precedes the recession. As they say, "The Stock Market Looks Forward, the Economy Looks Back".

In previous occurrences, how %often has there been a 50% rebound from a 20% correction? Is it normal for a 50% rebound, in this case, 1k point spike from a 20% correction to occur so fast (from Jan 2019 to Jan 2020 = 1 year)?

In a bubble, everything become frothy. Market is no exception. Come to think of it, when have we ever seen the market rise for 7 CONSECUTIVE years making nonstop ATHs? From the 2008 high (just prior to the subprime debacle), S&P has gained 1,601%. From the low of 2009 aka Great Recession, it made 2,671%. Some folks think this is normal. Go figure.

As an uneducated person, I would think the activity would be more towards the downside, or ranging at best, after a 20% correction - for a considerable amount of time (~1 year). But what do I know.

It took over 25 years to recover the losses from the Great Depression (85% drop from the top), whereas it took only 5 years to recover from the Great Recession (58% drop).

If we have learned anything from the Japanese asset bubble of the early 90s, it's that once the bubble bursts there's no going back. I highly doubt we will ever see S&P revisit 3,337 again in our lifetime.