Stock market vs the economy
“The National Bureau of Economic Research said Monday that the COVID-19 crisis has officially launched the U.S. economy into a recession, thus ending the longest economic expansion on record.
The NBER’s business cycle dating committee calls recessions based on broad checks on employment and production activity.
The committee said that it had determined that economic activity had peaked in February, citing sharp drops in employment and personal consumption following that month. The recession declaration ended the 128-month economic expansion that began in June 2009, which eclipsed the 1990s recovery as the longest on record.
When the NBER declares a “peak,” it essentially marks the beginning of a period of “significant decline.”
Since the first cases of Coronavirus took form in the United States, over 42 million Americans have lost their jobs and turned to unemployment benefits. Stay-at-home measures and businesses closures have halted economic activity on an unprecedented scale.
The NBER said official data from the Bureau of Labor Statistics confirmed that the labor market peaked in February. On production, GDP figures have yet to be published for the quarter covering the brunt of the pandemic. But the NBER said monthly readings on real personal consumption measures appeared to confirm that the U.S. consumer – a key driver of the economy – also peaked in February.”
Stock market expectations vs the economy in recession
What the US stock market has done in the last months is truly remarkable, it made a bottom so far in late March 2020 and ever since an impressive stock market rally with major stock indices almost in breakeven for 2020. The Nasdaq composite index has already gained on a year-to-date basis of more than 9%. The stock market today is rising as of 2:35 PM, ET time.
The main question for stocks now is the valuation and the catalysts that can move the US stock market higher or lower. Stock investing is different than stock trading, and from a fundamental analysis perspective these stock market price levels need a lot of caution. As economic activity has pushed the US economy into recession, and unemployment has surged the FOMO effect (fear of mission out) is now too strong to our analysis. We have mentioned that stocks like HTZ stock surging today while the company has filed for bankruptcy is beyond any sound investment policy, investing rules, and is the result of speculation. We will monitor the economic indicators to analyze the state of the US economy.