You did it again! You witnessed history once again. The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) maintains a chronology of the peaks and troughs of US business cycles. NBER recently declared the COVID infected recession lasted for only two months! That is the shortest recession on record.

NBER dated the economic trough in April 2020 and recovery began in May 2020. For readers of this newsletter, you may recall last summer we expected a 3–4 month recession with a trough in May or June. The resilience of American consumers and businesses supported by swift governmental action bested our estimations. The often-quoted definition of a recession (two quarters of economic contraction) is clearly an over-simplification. NBER has a more robust definition with specified measurements.

This begs the question… “What stage are we currently in?” Before this can be answered, it is important to note the length, timing and indicators are not absolute. Each economic cycle has its own developments, burdens and forces. However, there are general aspects which appear to mark the different phases.

Our estimation is the U.S. economy is moving past the initial recovery stage, often accompanied by explosive growth, and transitioning to a more sustainable expansion. Expansions tend to be the longest phase of the cycle. The expansionary phase is often marked with lessened fiscal and monetary support, increasing confidence, increasing employment, increasing manufacturing, higher demand for services and slowly increasing but low inflation. All of these are present in today.

Equity market performance is of particular note. The equity markets tend to presage the economy. Mostly because investors are forward looking and not concerned with history. While still in the midst of Q2 earnings season, reported earnings have been very strong yet accompanied by temperate forward-looking statements. Hence, company managements have recognized the torrid pace seems to be downshifting.

Stock market performance has been fairly benign since earnings season began. This is a reflection that the extremely strong Q2 results were expected and baked into the market. Only severe departures from expectations would cause the stock market to experience dramatic movements. Further, the stock market has priced in a more sustainable economic growth scenario matching moderating management comments.

Overall, the economy is in healthy shape. The downshift to a more sustainable growth trajectory should not be confused with maturing economy closing in on recession.


The opinions expressed are those of Heritage Financial Consultants and not necessarily those of Lincoln Financial Advisors Corp. This material may include forward-looking statements that are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied.