In the last recession, GDP contracted by less than 5%, but the stock market fell 57% from peak to trough. Stocks reacted to economic conditions in a way the “real” economy did not.
In our present situation, Wall Street strategists are predicting a second quarter contraction for the economy of up to 30% (annualized), which the drop in stock prices have already achieved.
Michael and Ben sort out some important distinctions between the stock market’s historic reaction to recessions and the recessions themselves…
Michael Batnick and Ben Carlson are doing two podcast episodes a week these days, check out Animal Spirits here.