Page 6 - DIY Investor Magazine - Issue 25

Shapes of recovery?
L V U L-shaped V-shaped U-shaped
The worst of all scenarios. A permanent loss of economic capacity and an extended slump. Less a recovery; more a prolonged recession or (whisper it ever so quietly) a depression. Example: The Great Depression (1929-1939).
The economy recovers quickly after a sharp downturn.
Examples: the US recession of 1953 – a response to the Fed raising interest rates.
V-shaped
An extended economic downturn but with an eventual return to pre-crisis levels. Example: The 1973-75 Nixon recession – caused in part by the OPEC oil embargo.
U-shaped
25 20 15 10
5
0 -5 -10
USGDP•UnemUpSloGyDmPen•tU•nBemuspinloeysmseCnytcl•eBusinessCycle
L-shaped
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What was happening at the time
7
1. Aug peak and Oct. market crash 2. New Deal and March trough 3. End of the Great Depression 4. Post WWII Marshall Plan of economic aid for Europe and beginning of the Cold War 5. May trough, Dow at 1929 level 6. Vietnam War and gold standard ended, Nov. peak 7. Stagflation (ie. inflation without growth), Watergate US political crisis, Fed raised rate 8. Expansion, Fed cut rate 9. Jan. peak, Fed raised rate, July trough 10. Reagan era, Expansion peaked in July
11. Nov. trough, Fed cut rates 12. Reagan-era defense spending 13. Black Monday market crash 14. Savings & Loans Crisis: catalyst for a recession 15. Long Term Capital Management crisis: catalyst for a recession 16. March peak, 9/11, and Nov. trough 17. Expansion 18. Contraction and Global Financial Crisis. 19. Obamacare (US healthcare programme) 20. Covid-19 pandemic.
Any views and opinions are those of the author, unless otherwise noted and is not investment advice.
This is not investment research or a research recommendation for regulatory purposes. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and its subsidiaries. Issued in the UK by BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Conduct Authority.
Issued in Europe (ex-Switzerland) by BNY Mellon Fund Management (Luxembourg) S.A. (BNY MFML), a public limited company (société anonyme) incorporated and existing under Luxembourg law under registration number B28166 and having its registered address at 2-4 Rue Eugène Ruppert L-2453 Luxembourg. BNY MFML is regulated by the Commission de Surveillance du Secteur Financier (CSSF).
Issued in Switzerland by BNY Mellon Investments Switzerland GmbH, Talacker 29, CH-8001 Zürich, Switzerland. Authorised and regulated by the FINMA
MAR001421 EXP 1 May 2021. T9143 09/20.
1929
1930 1931 1932 1933 1934 192395 19306 19317 19328 19339 193440 193451 193462 193473 194384 193495 19406 19471 19428 19439 194540 194551 194562 194573 195448 194595 19506 19517 19528 19539 195640 195651 195662 195673 195684 195695 19606 19617 19628 19639 196740 196751 196762 197637 197648 196795 19760 19717 19728 19739 197840
US Growth %
DIY Investor Magazine | Sept 2020 6