The most anticipated recession in recent U.S. history might not be as imminent as once thought, if historically low unemployment sticks around the way it has been. CEOs seem to have wised up to this, with a huge dip in mentions of a looming economic downturn during recent earnings calls. But Wall Street is not Main Street, and the stock market took a historic beating last year, and strategists are warning not to be fooled by the market’s gains in the first half of 2023, largely driven by the “black swan event” of ChatGPT and generative A.I. But some investors are warning about a different kind of recession that has to do with how much of Main Street really has piled into equities: an asset class recession.
An asset class recession means essentially that the economy as a whole would not shrink—and unemployment may not go up much from its recent 50-year low—but markets and asset values would take a prolonged hit, and most of the pain would be focused on those who rely on the value of their investments in addition to or instead of their salaries. Stocks in particular have made up a bigger and bigger chunk of U.S. households’ financial assets in recent years. In fact, Americans haven’t been invested in the stock market at this rate since 2008.
