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U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

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Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#71

Post by tathougies »

steveeq1 wrote: post #57
hn_throwaway_99 wrote: post #17

Earlier quoted context omitted.

3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…

Better explanation: the fed is buying securities.

That doesn't explain foreign markets

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#72

Post by jariel »

iambateman wrote: post #4

I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?

The market ostensibly has a much longer view of things.

The word 'recession' is essentially meaningless without knowing the impetus for it.

The 'outsourcing of Jobs to China' is a huge, permanent, secular shift that may affect stocks one way or another, but the 'coronavirus' is something I think business believes we will recover from quickly - for the most part.

Tim Cooke told Trump he thinks it will be a 'v-shaped recovery'.

But remember that this recession was 'self imposed' in the sense that we ordered businesses to shut down. We can open them again just as quickly. Obviously that won't the entirely the case but I think this is the sentiment.

When a new CEO takes over a business, he might 'write off' a bunch of crap. Even though the company loses money that quarter, analysts see it as a 'positive sign' because the company is getting rid of dead weight on their balance sheet. So like a 'one time charge' type thing.

I think markets are seeing corona as a 'one time charge'.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#73

Post by metalliqaz »

onion2k wrote: post #43
lmilcin wrote: post #34

Nah, it signals exactly nothing. If there was no Coronavirus, then maybe. With Coronavirus it is just as likely that the economy is going to rebound once the worst of the virus passes. People stopped buying stuff but rest assured, they will make up for it when they finally can.

People stopped buying stuff but rest assured, they will make up for it when they finally can. Apart from the people who were laid off, or spent their savings because they had no income, or lost their businesses because they couldn't pay their debts, or ... well, it's a long list. People who think the world is just on pause and everything will bounce back to normal in a few months need to look outside of their filter…

Also people who didn't lose their jobs but are now spooked and are going into save mode.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#74

Post by [deleted] »

hn_throwaway_99 wrote: post #17
iambateman wrote: post #4

I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?

3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…

[deleted]

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#75

Post by godzillabrennus »

steveeq1 wrote: post #57
hn_throwaway_99 wrote: post #17

Earlier quoted context omitted.

3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…

Better explanation: the fed is buying securities.

Paying a premium for junk...

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#77

Post by matwood »

hn_throwaway_99 wrote: post #17
iambateman wrote: post #4

I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?

3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…

You're spot on. The companies you listed plus others are going to come out of this leaner, with fewer competitors, and a whole set of new people forced to learn how to use them. Great news for those companies.

I would also add a #4 to your list that people often miss. There is risk and there is uncertainty (think unknown unknowns). The market hates uncertainty because it is so hard to price. Risk though can be priced. This is often why the market will go up with numbers that look really bad when they come in. They are no longer uncertain.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#78

Post by eyeundersand »

harryh wrote: post #20
freeone3000 wrote: post #9

Earlier quoted context omitted.

Stock market is essentially a sentiment graph. There's no need for it to be linked to any underlying useful metric - it's entirely likely people are investing in stocks simply because all other investments are worse.

This is true in the short run, but not in the long run.

"In the long run, we are all dead." ~Keynes

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#79

Post by timerol »

XIVMagnus wrote: post #26

I thought we were already in recession, ever since the lockdown.

Being in a recession is a weird thing to detect. From Wikipedia:

> In the United States, it is defined as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales". In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters.

So it's not a recession unless it lasts for a while. So when the markets suddenly go down, it's not known if a recession is happening, until it's been ongoing. Since we've already been in lockdown for more of Q2 than Q1, its reasonable to expect that we're in a recession. But it's not official yet.

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