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COMPARISONS TO THE 1981-82 RECESSION




The 1981-82 recession was one of the worst economic contractions since the Great Depression. For many investors who lived through that period, today’s conditions hold some unsettling similarities. It’s easy to understand why. Mounting inflation in the early 80s prompted a tight monetary policy response from then Federal Reserve (the Fed) Chair Paul Volker. Entering 2022, Fed Chair Jerome Powell has abandoned his characterization of mounting inflation as “transitory” and has signaled an aggressive monetary response that includes ending bond purchases, rate hikes and potentially quantitative tightening (i.e., shrinking the Fed’s balance sheet).

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