Call it whatever you like—recession or depression—the current economic state has investors concerned that a worst-case scenario is in the offing.
Many think the word “depression” is, in fact, incidental to the real state of affairs. Things are bad, really bad, and everybody knows it.
“The closest thing we can find to the market collapse that we are experiencing now would really be ’73-’74,” says Peter J. Tanous, president and director of Lynx Investment Advisory in Washington, D.C. “The market went down over the two-year period 45 percent. I was already in the business 10 years in ’73, and I can tell you this is far, far worse.”
The dreaded “D” word has crept its way increasingly into public dialogue as both gross domestic product and the stock market have cratered since the beginning of 2009, beyond levels previously imagined by a large swath of analysts.
But unlike recession, there’s really no technical definition for depression.
Just the use of the word, though, harkens back to the Great Depression that began with the stock market crash of 1929, and is sending shivers through the investing community.
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“It becomes worrisome because so much of investing is based on confidence,” says Quincy Krosby, chief investment strategist at The Hartford. “If you think that this tug of war going on now, that we are not going to pull out this, that any relief is temporary and that we will follow the pattern of depression, it’s going to keep investors out of the market.”