No two recessions are the same, but they tend to follow a similar pattern. Typically, an accelerating economy burns through existing spare capacity. This leads to inflationary pressure, which forces the Fed to act. As markets anticipate rate hikes, the yield curve inverts. Growth slows and, more often than not, the economy rolls over, taking the market with it.
The current economic rebound is the slowest of the post-war period. Growth is being held back by a modest housing recovery and weak business confidence. As a result, abundant spare capacity exists, which prolongs the length of the cycle.
~ Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, "Bull market won't die until a recession hits: RBC," MarketWatch.com, April 28, 2014
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