Recession is coming. We can debate the timing, but the economy will turn decisively downward at some point. My own analysis, looking at the data available on April 4, says recession isn’t likely this year but unfortunately looks very probable in 2020.

In addition to when it will happen, there’s also the question of how deep the next recession will be. A shallow downturn wouldn’t be fun, but compared to the last one might feel relatively refreshing.

Alas, I don’t think we will be that lucky. I think the opposite: The next recession will be deeper, longer and far more painful to many more people than your average recession, and could persist as long as the last one. That is because the next recession in all likelihood will be truly global. If you sailed through 2007–2009 without your lifestyle changing, I wouldn’t assume it will happen that way again.

Ironically, but not surprisingly, it will be the response to the last recession that makes the next one so much worse. Part of the reason is that investors once again “learned” that if you simply stay the course, the market will get you back to where you were and more. The massive move into low-fee index investing instead of active management will make the next recession more painful.

You must understand that 75% of today’s wealth is in the hands of retirees and pre-retirees. Most have a significant portion of their money in index funds, and they’re going to see significant erosion of their retirement assets. I’m thinking especially of those depending on public pensions, which are heavily weighted to a form of index investing. Public pensions are already significantly underfunded (in general) and a bear market will make them even more so. It will be painful and I can assure you it will cause a lot of political angst. Today I’ll tell you why I think this. It may be one of the more important letters I’ve written in the recent past, so read carefully.