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Illustration: Aïda Amer/Axios

One of the biggest risks to the stock market is the fear of a recession, much more so than a recession itself.

The big picture: Yes there will be a recession, but it's almost certainly not going to be another catastrophic financial crisis, like 2008. It could be very mild.

  • When will the recession arrive? No one has a clue, and if history is any guide, there will be debate even while we’re already in it about whether there will be one.
  • What will a recession mean in practice? Recessions are generally bad for employment, but the jobs situation could deteriorate even without a recession. The market is not a snapshot of the economy, and can easily rise during a recession.

There are warning signs of an economic slowdown, but there's a strong case that a recession could still be several years away.

  • We're not about to collapse under a pile of debt. Household finances are still healthy. Household outstanding debt is about 79% of GDP. It was 125% at its 2009 peak. And while corporate debt has gotten a bit excessive, BlackRock says that debt levels are still manageable.
  • A large crash like in 2000 could hurt, but a simple bear market, with valuations down 20% from their high, would have relatively little effect on the economy.
  • Interest rate hikes have become less of a risk. Fed chairman Jerome Powell has already dialed back his plans for rate hikes in 2019, saying any such hikes will only arrive in response to new data about economic strength. Interest rates are not yet so high as to cause a recession.
  • Hundreds of thousands of long-term unemployed have re-entered the labor force, often at companies where they learn transferable skills, Axios Future editor Steve LeVine noted yesterday. That may juice the entire economy, creating the conditions for higher GDP growth and "a persistent, positive macroeconomic effect," says Jason Furman, former chief economist to President Obama and now a professor at Harvard.

The bottom line: We have nothing to fear but fear itself.

Go deeper

"Atmospheric river" swings Northern California from drought to flood

Satellite view of the bomb cyclone swirling off the coast of the Pacific Northwest and the atmospheric river affecting California on Oct. 24. Photo: CIRA/RAMMB

A series of powerful "atmospheric river" storms are delivering historic amounts of rainfall across parts of drought-stricken California and the Pacific Northwest.

Why it matters: The atmospheric river, packing large amounts of moisture, was causing Northern California to whiplash from drought to flood, as it slowly moved south overnight. It's triggered widespread power outages, flooding and mudslides.

In photos: Drought-ravaged California lashed by major storm

Workers try to divert water into drains as rain pours down on Oct. 24 in Marin City, California. Photo: Justin Sullivan/Getty Images

A major storm system was pummeling Northern California and parts of the Pacific Northwest with heavy rains overnight.

The big picture: "Atmospheric river" storms, associated with a record-strong "bomb cyclone" offshore from the Pacific Northwest, have brought flooding and mudslides to parts of California that were razed by recent wildfires and in severe drought. It's also caused widespread power outages in California and Washington state.

4 hours ago - World

Sudan's military places civilian prime minister under house arrest

Sudanese Prime Minister Abdallah Hamdok during a 2020 news conference in Khartoum, Sudan. Photo: Mahmoud Hjaj/Anadolu Agency via Getty Images

Sudan's civilian Prime Minister Abdalla Hamdok was put under house arrest and several other ministers were also detained Monday in what appears to be a military coup in the country, per local reports.

Why it matters: The arrests of the civilian faction in the Sudanese government came a day after U.S. envoy Jeffrey Feltman met with the head of the military faction of the Sudanese government General Abdul Fattah al-Burhan and warned him against staging a coup.