(click for larger and sharper image)
October unemployment came in 6.5% vs consensus of 6.3%. DJIA rallied almost 3% anyway despite of bad news, partly on technical rebound and partly the number already baked in. This has an implication -
(WSJ)The economy contracted in the third quarter and is expected to shrink at an annual rate of up to 4% in the fourth. Many forecasters also are penciling in a 2% annualized decline in the first three months of next year.
Since the US Q3 GDP already in -.3% and another negative number for Q4 is almost 100%. By academician definition, a consecutive two-quarter negative number will be defined as a recession. Please welcome "R". Act I done.
Act II, how severe and long ?
The good news is once recession is declared, market tends to move up higher most of the time - worst case is flat to 10% down. Best case is 20-40% up. For this round, the market pre-recession declaration is priced in as severe as 1973.
PS. Don't get me wrong, I'm still cautious, historical data are for references only.
No comments:
Post a Comment