History

• When looking at the results of the stock market and calculating whether there's a recession or depression, normally the Great Depression of 1929 is the benchmark. In 1929, the market dropped dramatically. The Dow Jones Industrial Average, a market benchmark, went from the high of 381 and dropped suddenly to 199. The drop was indicative of tough times ahead. However, in almost all bear markets, those with a downward trend, there's a rally. This market was no different and rallied back to 294. Instead of selling, people believed the worst was over. But soon the market dropped again and continued to decline until it reached 41.22 in 1932. It took until the 1950s for the market to fully recover.
  
  

Features

• The market is simply a reflection of the problems in the economy. If you look at the global economy of the 1930s, you'll see that all stock markets and global economies suffered. In today's global economy, some experts believe that a drop in international markets as well as those of the U.S. recession point to a likely economic depression.
  
  

Significance

• Unemployment is also a predictor of a depression. With so many companies offering 401(k) plans, withdrawals from those accounts adversely affect the stock market. As more people become unemployed in an economy, they use their savings to survive. Since many have no other savings than their company 401(k), they sell the stock in their account to use for daily living expenses. This drives a recession market down even further. People also spend less, which drives down the GDP.
  
  

Identification

• It's difficult to tell the difference between a bear market upsurge that is later followed by a downward spiral in the market with an ensuing depression. Short periods of upward market trends, held up only with the promise and hope of recovery, often fall short and spiral back down even further. These drops herald the beginning of a depression. If the market climbs, drops and climbs higher with improved employment numbers and GDP, the upward movement indicates a recession and recovery.
  
  

Stock Selections

• Select stocks or positions that suit a recession and depression market. People need specific types of products whether employed or on the verge of bankruptcy. Look for stocks that revolve around medicine and stocks in companies which produce products that consumers continue to use even when money is tight. Utility stocks and consumer goods, especially personal care products, normally don't drop as dramatically as the rest of the market during either a recession or depression, or even better, remain level or rise slightly.
  
  

Considerations

• If you failed to sell off and suddenly find your stocks are worth less than half their original amount, you might as well hold tight. Taking a wait and see approach at this point is the best possible advice. You don't actually lose the money until you sell. The market may have bottomed out and be back on the mend. In recession and depression markets, there's always a low followed by a dramatic climb. The amount of decline and length of time it continues is the significant demarcation between a recession stock market and a depression stock market.