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Macro Musing | How bad are recessions for asset returns?

Recessions come and go, but they can have significant effects on people’s current livelihood because of unemployment and future livelihood through the impact on asset prices and so wealth. Given the very sharp increases in interest rates over the past two years, and the largest inflation shock in decades, many analysts have been expecting recessions around the world. However, the resilience of output, and in particular labour markets, has increased the chance for soft landings. But in Australia GDP per capita declined over the first half of this year so based on a sensible definition of a recession, Australia already has been in a mild recession. What does this mean for asset prices?