What Is a W-Shaped Recovery?

When charting economic measures such as employment and gross domestic product (GDP)𓄧, a W-shaped recovery look♑s like a "W": a sharp decline followed by a sharp rise back upward, followed again by a sharp decline and ending with another sharp rise.

The middle section of the W can represent a significant 澳洲幸运5官方开奖结果体彩网:bear-market rally or a recovery that was stifled by an addit📖ional economic crisis. A W-shaped recovery is also known as a double-dip recession.

Understanding a W-Shaped Recovery

A W-shaped recovery generally is characterized by a period of extreme volatility in comparison with other types of recoveries. There are countless other shapes a recession and recovery chart can take. Common examples include patterns in the shapes of🐬 the letters "V," "U," and "L." Each letter represents the general ಞshape of the recovery's chart of economic metrics that gauge economic health.

A W-shaped recession begins like a V-shaped recession, but then turns back down again after showing false signs of recovery. W-shaped recessions are also called "澳洲幸运5官方开奖结果体彩网:double-dip recessions" because the eco🌞nomy drops twice before the full recovery is achi🧔eved.

A W-shaped recession is painful because many investors who jump back into 🅺the markets after they believe the economy has found a bottom end up getting burned twice—once on the way down and then once again after the false rec🌼overy.

The U.S. experienced a W-shaped recovery in the early 1980s. From January to July 1980 the country's economy experienced the initial recession, then entered recovery for almost a full year before dropping into a second recession in 1981 to 1982.

Drastic shifts in market sentiment are common. This is a natural part of the economic cycle and is expected based on the release of new information. Broadly speaking, concerns of the day lead to sudden shifts in consumer or corporate behavior, which in turn have a great impact on the direction of the markets and state of the economy.

Looking at the COVID-19 pandemic, global economies were hit hard during the first wave, and then recovered at different rates as news of a vaccine was announced, and then the administration of it was planned an🍎d accomplished. Subsequent waves hit economies and markets in different ways, but for many, a move lower was the norm as government restrictions were altered, businesses closed their doors, and individuals' finances we🅰re affected.

Looking a bit further back in history, a strong example of a W-shaped recession was the European debt crisis that occurred between 2010 and 2014. The crisis spilled out of the Great Recession near the end of 2009 and was marked by high levels of 澳洲幸运5官方开奖结果体彩网:government debt.

As the pressure of bank bailouts increased, investor confidence decreased, which sparked the start of an economic decline. Once immediate concerns over certain governments' solvency levels started to wane, broader economic𓃲 conditions started to improve.

However, this improvement would turn out to be short-lived as further rounds of bailouts and shifts in spending would be required, which in turn affected the trajectory of the recovery and resulted in a double-dip recession. Countries that were hardest hit by the double-dip recession were Portugal, Spain, Germany, Ireland, and Cyprus.

The Bottom Line

A W-shaped recovery, or a double-dip recession, is an economic cycle of 澳洲幸运5官方开奖结果体彩网:recession and recovery that looks like the letter "W" in investment or economic charts of certain economic measures such as GDP and employment. It is a recession followed by a brief recovery followed by another recession. Such relapses in economic, corporate💛, or consumer-level trends are fairly common.