Money Supply Decline and Tighter Lending Spark Recession Fears, But Historical Data Shows Downturns Often Brief
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U.S. money supply (M2) is declining for the first time since the Great Depression, which has historically preceded economic downturns and stock market declines.
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Commercial bank credit has also pulled back significantly, indicating banks are tightening lending standards. This can slow economic growth.
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With signs pointing to a potential recession, there are concerns the red-hot stock market could see a sizable correction.
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However, history shows recessions and stock market downturns are usually short-lived. Over the long run, stocks tend to rise in value.
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Analysis shows the S&P 500 has produced positive returns over every 20-year period going back to 1900, illustrating the power of long-term investing.