U.S. Economy

Anatomy of a Recession


Where do we stand - and what should we watch for in the coming months?

The global coronavirus pandemic has unleashed historic volatility and turned the ClearBridge Investments  Recession Risk Dashboard red, suggesting a recession is underway.  ClearBridge has developed a Recovery Dashboard to help identify conditions that have been necessary for forming historical durable market bottoms. This dashboard comprises nine indicators that fall into three key areas, that ClearBridge views are essential for lasting economic expansion to take root in the United States.

U.S. Recession Risk

  • 12 variables have historically foreshadowed a looming recession

Data as of May 31, 2020
Sources: ClearBridge Investments, Bureau of Labor Statistics (BLS), Federal Reserve, Census Bureau, Institute for Supply Management (ISM), Bureau of Economic Analysis (BEA), American Chemistry Council, American Trucking Association, Conference Board, and Bloomberg. 

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades. Source: The National Bureau of Economic Research  

Sources: ClearBridge Investments, BLS, Federal Reserve, Census Bureau, ISM, BEA, American Chemistry Council, American Trucking Association, Conference Board, and Bloomberg. The ClearBridge Recession Risk Dashboard was created in January 2016. References to the signals it would have sent in the years prior to January 2016 are based on how the underlying data was reflected in the component indicators at the time.

U.S. Recession Recovery Dashboard

  • 9 variables have historically foreshadowed a durable recovery
  • The overall signal suggests the economy remain in a recession

Data as of May 31, 2020. 
Sources: ClearBridge Investments, BLS, Federal Reserve, Census Bureau, ISM, BEA, American Chemistry Council, American Trucking Association, Conference Board, and Bloomberg. The ClearBridge Recession Risk Dashboard was created in January 2016. References to the signals it would have sent in the years prior to January 2016 are based on how the underlying data was reflected in the component indicators at the time.

U.S. Recovery Case Dashboard

  • Case Study: 2007-2010
Source: BLS, Federal Reserve, Census Bureau, ISM, BEA, American Chemistry Council, American Trucking Association, Conference Board, and Bloomberg.

IMPORTANT INFORMATION

Source: Legg Mason and ClearBridge Investments. This document, provided by Legg Mason Asset Management Singapore Pte. Limited (“Legg Mason”) (Registration Number (UEN): 200007942R), is for information only and does not constitute an offer or solicitation to buy or sell any units in any fund.

The mention of any individual securities / funds should neither constitute nor be construed as a recommendation to purchase or sell securities, and the information provided regarding such individual securities / funds is not a sufficient basis upon which to make an investment decision. Portfolio allocations, holdings and characteristics are subject to change at any time. Legg Mason, its affiliates, officers or directors, may have an interest in the acquisition or disposal of the securities mentioned herein.

The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice.

Although information has been obtained from sources that Legg Mason believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice.

Neither Legg Mason nor any officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this document or its contents. This document may not be reproduced, distributed or published without prior written permission from Legg Mason. Distribution of this document may be restricted in certain jurisdictions. Any persons coming into possession of this document should seek advice for details of, and observe, such restrictions (if any).