The stock market is NOT the economy

“How can the stock market go up, while the economy is still struggling to recover amid the pandemic?” The answer is that the stock market is not the economy and vice versa.

Let’s start with the economy. As expected, the second quarter of 2020 was the most debilitating for the U.S. economy since the government began keeping records in 1947 —

Jill Schlesinger 

and about four times worse than the weakest quarter of the Great Recession. The Bureau of Economic Analysis said real gross domestic product (GDP) decreased at an annual rate of 31.7% percent in the second quarter of 2020. The good news is the recovery has begun and the third quarter should show a significant bounce.

Even with the improvement, it is likely to be a long slog. “Nearly two-thirds of the National Association for Business Economics (NABE) members who participated in the August 2020 NABE Economic Policy Survey believe the U.S. economy continues to be in a recession that began last February,” said NABE President Constance Hunter, CBE, chief economist, KPMG. “Almost half the respondents expects inflation-adjusted gross domestic product to remain below its fourth-quarter 2019 level until the second half of 2022 or later. And 80% of panelists indicate there is at least a one-in-four chance of a ‘double-dip’ recession.”

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