The reality is the “V-Shaped” recovery economists wanted seem to be fading.1
Though businesses reopened and millions of people got their jobs back, millions more are still unemployed.2 And more layoffs are coming.3
Does that mean we’re still in a recession? Technically, we won’t know until Q2 and Q3 economic data are released.
Best guess? We’re probably still in a recession.
The more optimistic recovery scenarios depended on containing COVID-19 infections so Americans could safely get back to business.
That…didn’t happen.
The question now is whether rising infection rates will put us in a “W-Shaped” double-dip recession, or a slower “L-Shaped” or “Swoosh-Shaped” climb back.
That’s all very interesting, but how does it affect us here- in the USA?
In many ways, our local economy is a microcosm of the larger state of affairs.
- As COVID-19 cases have INCREASED in your state you’ve still got a ways to go before your on solid ground.
- As COVID-19 cases have DECREASED in your state, your hopefully on the other side of the crisis.
Our overall ability to bounce back depends on a few things: 1) keeping infection rates down; 2) workers keeping the jobs they have and returning to the ones they lost; 3) folks shopping, eating out, and spending money locally.
In terms of markets, the recent gains make it clear that traders are looking past the current gloom to a hopefully rosy future.
Are they clairvoyant? Foolishly optimistic? Not optimistic enough?
I agree with Yale economist Robert Shiller’s take: he thinks this is a FOMO market driven by the Fear Of Missing Out. Many traders regret not jumping into the 2009 rally and are determined not to miss out again. That psychological narrative is pushing up the market even in the face of bad news.4
Will it continue?
We’re in earnings season and investors are waiting to see how badly U.S. companies were damaged last quarter. Since many companies have refused to release earnings forecasts, we’re prepared for surprises. Positive and negative.
Bottom line: Buckle up, I think we’re in for a choppy ride.
