What Happens to IG Credit Spread (OAS) When Real GDP Turns Negative?
What happens when real GDP contracts? Recession definition, Fed response, and historical market behavior during negative growth quarters.
How IG Credit Spread (OAS) Responds
Scenario Background
Real GDP measures total US economic output adjusted for inflation. A negative quarterly print (annualized) signals the economy shrank during that period. While the NBER uses a broader set of indicators to officially date recessions, two consecutive quarters of negative real GDP has historically been the shorthand definition.
Read full scenario analysis →Historical Context
The US has had 12 recessions since 1948, each including at least one negative quarter. The 2020 COVID downturn produced -5.1% (Q1) and -31.2% (Q2) annualized contractions, the steepest in post-war history. The 2008-2009 Great Recession included four consecutive negative quarters with a cumulative 4.3% decline. The 2001 recession was mild by historical standards with only three negative quarters totaling less than 1% decline. The 1981-82 recession included six negative quarters.
What to Watch For
- •Atlanta Fed GDP Now turning negative
- •Chicago Fed National Activity Index below -0.7
- •GDI (Gross Domestic Income) confirming GDP weakness
- •Two consecutive negative quarters (technical recession)
- •NBER dating committee signaling recession onset
Other Assets When Real GDP Turns Negative
Other Scenarios Affecting IG Credit Spread (OAS)
Get scenario analysis and IG Credit Spread (OAS) alerts delivered to your inbox.