Tuesday, June 9, 2020
On the same day the Nasdaq index soared to a new all-time high, a report was released by the National Bureau of Economic Research asserting that the U.S. economy is indeed in recession. Even more, this latest recession — the third for the U.S. in the 21st century thus far — began in the latter half of February, not mid-March, when most of the “shelter in place” orders from the government came down the pike.
The Dow fell 100 points around mid-day on February 20, and dropped another 200 points the day after that. This capped off a week where all major U.S. trading indexes had sold off 1% or more. At first, market participants seemed puzzled by the development, but over time we can now see it was the coming storm of the COVID-19 coronavirus that had investors spooked.
Because COVID-19 was impacting places like Mainland China, South Korea and Iran at the time, the seriousness of a potential pandemic was not being addressed, at least on a national level. There was still doubt among millions of Americans whether the disease was a politically motivated hoax, and thus healthcare policy changes went largely ignored.
By the time March rolled around and the Federal Reserve was taking drastic measures to increase liquidity and access to credit, the message was clear: COVID-19 was coming for us. Indeed, it had already found its way to nursing homes in the Seattle suburbs, among other places. Once it got to New York City in a big way in March, the shutdown of the U.S. economy eventually shed 40 million jobs and required trillions of dollars to flood the marketplace.
This approach now appears to have worked extremely well, as the reopening of the U.S. has spurred optimism that this will be a short-lived recession. With an outlook toward expansion in Q3 (fiscal Q2 is shot, for the most part; nobody is bullish on upcoming earnings numbers this summer), those industries dormant and rife with worry about their futures look to have a new lease on life.
Future are down in Tuesday’s pre-market; it looks for all the world like a good time to take a breather. After such surprisingly great gains over the past couple weeks, it would be wise to take a look around again. Currently, it’s too early to tell if early reopenings in certain states have led to an increase in COVID-19 cases, although charts in Florida, Texas and Georgia are moving the wrong way. And for all the positive sentiment currently surrounding Q3 — when some analysts expect this COVID recession to officially have expired — a second wave of coronavirus infections may again derail the economy.
The Federal Open Market Committee (FOMC) convenes again today for two days worth of discussions and plans for the U.S. economy going forward. Tomorrow afternoon, Fed Chair Jay Powell will give his press conference to talk about the FOMC’s conclusions. Most analysts see Powell focusing on positive elements of the effects of Fed moves to this point; will he have any pressing words of caution to go along with them?
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
Zacks Responds to Pot Stock "Gold Rush"
With almost unimaginable profit potential, legalized marijuana is skyrocketing from $9 billion in 2017 to an expected $32 billion in 2020 to a possible $146 billion by 2025. Not since the Repeal of Prohibition has there been such a release of pent-up demand.
See Zacks’ recommended buys >>
Image: Shutterstock
U.S. in Recession as Nasdaq Peaks
Tuesday, June 9, 2020
On the same day the Nasdaq index soared to a new all-time high, a report was released by the National Bureau of Economic Research asserting that the U.S. economy is indeed in recession. Even more, this latest recession — the third for the U.S. in the 21st century thus far — began in the latter half of February, not mid-March, when most of the “shelter in place” orders from the government came down the pike.
The Dow fell 100 points around mid-day on February 20, and dropped another 200 points the day after that. This capped off a week where all major U.S. trading indexes had sold off 1% or more. At first, market participants seemed puzzled by the development, but over time we can now see it was the coming storm of the COVID-19 coronavirus that had investors spooked.
Because COVID-19 was impacting places like Mainland China, South Korea and Iran at the time, the seriousness of a potential pandemic was not being addressed, at least on a national level. There was still doubt among millions of Americans whether the disease was a politically motivated hoax, and thus healthcare policy changes went largely ignored.
By the time March rolled around and the Federal Reserve was taking drastic measures to increase liquidity and access to credit, the message was clear: COVID-19 was coming for us. Indeed, it had already found its way to nursing homes in the Seattle suburbs, among other places. Once it got to New York City in a big way in March, the shutdown of the U.S. economy eventually shed 40 million jobs and required trillions of dollars to flood the marketplace.
This approach now appears to have worked extremely well, as the reopening of the U.S. has spurred optimism that this will be a short-lived recession. With an outlook toward expansion in Q3 (fiscal Q2 is shot, for the most part; nobody is bullish on upcoming earnings numbers this summer), those industries dormant and rife with worry about their futures look to have a new lease on life.
Future are down in Tuesday’s pre-market; it looks for all the world like a good time to take a breather. After such surprisingly great gains over the past couple weeks, it would be wise to take a look around again. Currently, it’s too early to tell if early reopenings in certain states have led to an increase in COVID-19 cases, although charts in Florida, Texas and Georgia are moving the wrong way. And for all the positive sentiment currently surrounding Q3 — when some analysts expect this COVID recession to officially have expired — a second wave of coronavirus infections may again derail the economy.
The Federal Open Market Committee (FOMC) convenes again today for two days worth of discussions and plans for the U.S. economy going forward. Tomorrow afternoon, Fed Chair Jay Powell will give his press conference to talk about the FOMC’s conclusions. Most analysts see Powell focusing on positive elements of the effects of Fed moves to this point; will he have any pressing words of caution to go along with them?
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
Zacks Responds to Pot Stock "Gold Rush"
With almost unimaginable profit potential, legalized marijuana is skyrocketing from $9 billion in 2017 to an expected $32 billion in 2020 to a possible $146 billion by 2025. Not since the Repeal of Prohibition has there been such a release of pent-up demand.
See Zacks’ recommended buys >>