Global Macro Research
Macro BytesAre recessions really predictable? Rethinking economic 'common sense'
Are downturns driven by cycles or shocks? A fresh take on forecasting recessions.
Authors
Paul Diggle
Chief Economist
Luke Bartholomew
Deputy Chief Economist
Duration: 40 Mins
Date: 18 jun 2026
Recessions are often discussed as if they follow a predictable script: economies expand, overheat, and eventually fall into decline. But what if this widely accepted view is flawed?
In the latest episode of Macro Bytes, economist Tyler Goodspeed challenges conventional thinking, drawing on centuries of data to question whether downturns can be understood or forecast in the way most investors assume. The discussion highlights how much of what we consider “common sense” about recessions may not hold up in practice, particularly when tested against long-run evidence.
Some highlights:
Some highlights:
- The myth of the business cycle. The idea of clear early, mid and late-cycle phases is deeply ingrained in market philosophy, but historical data shows little consistent relationship between the length or strength of an expansion and the recession that follows, calling into question how useful this framework really is.
- Shocks, not patterns. Rather than being inevitable, recessions are typically triggered by unexpected events, such as financial crises, energy shocks, pandemics or geopolitical disruption, which by nature are difficult to anticipate or model in advance.
- We are not “due” a downturn. Evidence from both the US and UK suggests expansions do not simply end with age. A long expansion is no more likely to end than a short one, undermining a common narrative in market commentary.
- Limits of indicators. Widely used signals, including yield curve inversions, can offer insight but are unreliable over time, producing both false positives and missed recessions when viewed across different periods.
- Do recessions help? The idea that downturns are economically beneficial is challenged. They often have lasting negative effects on employment, innovation and investment, with limited evidence of any meaningful “cleansing” impact.
If recessions are driven by shocks rather than cycles, the implication is clear: investors should focus less on timing downturns and more on building resilient portfolios that can withstand a wide range of outcomes.
Listen to the latest episode of Macro Bytes for the full discussion.
Listen to the latest episode of Macro Bytes for the full discussion.
