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Sec. ECONOMY Gauging the slowdown in global economies he global economy occur during the first half of 2023 following trough. Since World War II, will likely slow from and will likely not be as deep as the average recession has lasted T the upper-2% range the 2008 recession, which was just over 10 months (down from an in 2022 down to initiated by a fundamentally flawed average of 17 months if you date back the mid-1% range financial market. to 1854), according to the National in 2023 [Fig. 1]. Much depends on Bureau of Economic Research. China's growth path. An important MORE CLARITY ON POTENTIAL Given the unique cause of the 2020 aspect for investors is that the U.S. FOR U.S. RECESSION recession, the time between peak and appears to have fewer headwinds to There are three factors for defining trough was the shortest on record— growth compared with Europe and a recession: depth, diffusion, and only two months. other developed economies. The duration—conveniently referred to One reason we’re currently seeing divergence between the domestic as the “three Ds.” Depth refers to a healthy debate on the likelihood of and international economies is most declining economic activity that is a recession is that for most of 2022, obvious in the inflation regime. greater than any relatively small not all of the metrics were flashing Germany, for example, is still change. Diffusion describes an warning signs. However, recent experiencing accelerating rates of economy that has experienced a data may give us more clarity. The inflation, whereas the U.S. has likely contraction in a wide range of sectors, Conference Board’s Leading Economic moved past the peak. The longer such as trade, business activity, and Index (LEI) has declined for seven of inflation is uncontained, the riskier consumer spending. Duration, likely the last nine months, showing that the growth prospects. the least important of the three the economy could enter a period If the U.S. falls into a recession, Ds, measures the time between the of significant and broad-based the chances are that it would previous business cycle peak and the contraction. The decline is predictable as many sectors, such as housing, started slowing months ago. Since the inception of the index, a decline of this Economic forecasts magnitude over a six-month period has always foreshadowed a recession 2023 annual forecasts GDP growth (Y/Y%) CPI (Y/Y%) in subsequent quarters [Fig. 2]. As United States 0.50% 3.50% such, we think recession risks appear more probable by the beginning of Eurozone -0.10% 4.80% 2023. If the economy does fall into Advanced Economies 0.40% 4.50% a recession, the cause will likely be fig. Emerging Markets 3.50% 5.60% from the consumer sector retrenching 1 after years of inflationary pressures, Global 1.70% 4.90% high housing costs, and slow real Source: LPL Research 11/15/22 Forecasts set forth may not develop as predicted and are subject to change. wage growth. LPL RESEARCH

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