Ken Fisher wrote an optimistic blog post titled My take on the coronavirus, the economy, and the stock market.
« Typically, recessions occur after the stock market peaks and after a bear market begins. Recessions correct prior excesses in the system. »
« In this case, the clampdown in normal economic activities creates what is best called a contraction, not a recession. »
Per The Financial Dictionary.
Contraction: In a business cycle, the time between the peak and the bottom. That is, a contraction occurs between the end of economic growth and the end of the subsequent recession. Contractions are characterized by layoffs, a decline in GDP, and other negative factors. However, historically, contractions have tended not to last as long as expansions
Recession: A prolonged economic retraction. While there is no technical definition of a recession, they are conventionally defined by two or more consecutive quarters of negative GDP growth. Recessions are marked by declines in productivity and investment and high unemployment.
« Think of it like this: a spring has been depressed. When you take the pressure off the spring, it’ll bounce back. How fast the spring bounces back remains unclear. But it will bounce back because there will be pent-up demand. The airplanes and pilots are still there to fly again and the restaurants can reopen. Yes, there will be winners and losers, but this is different from correcting prior excesses, such as the collateralized loan obligations that contributed to the 2008 financial crisis or the overvalued tech companies back in 2000. We don’t have to work our way through those excesses. We don’t have those excesses today. In fact, we had a pretty healthy economy in February. »
Articles of Interest 