To “V” or Not to “V”? That is the question.

The Great Recession

Whether it is more likely for the economy to recover in a V-shaped pattern or not, the stock market did. Now it is struggling everyday to hold the pattern as it keeps trying to refasten on news of a V-shaped recovery but gets beaten down by news of COVID-19 threatening the recovery:

Stocks rose on Tuesday as a record jump in retail sales — coupled with positive trial results from a potential coronavirus treatment and hopes of more stimulus — sent market sentiment soaring…. The U.S. government reported a record 17.7% increase in retail sales for May….

Economists polled by Dow Jones expected a gain of 7.7%. President Donald Trump touted the strong data, adding it “looks like a BIG DAY FOR THE STOCK MARKET, AND JOBS…!”

“A potential Covid steroid treatment in the UK combined with record retail sales and news of additional stimulus has been met with unbridled optimism,” said Mike Loewengart, a managing director at E-Trade. “We’ve been used to seeing record lows in economic fundamentals over the past few months and to see the pendulum swing so far in the other direction is nothing if not encouraging.”

Dow jumps more than 500 points as Wall Street cheers record retail sales comeback

This is exactly what I have said we will see happening during the “reopening” of the forcibly closed economy. So long as COVID-19 keeps its head down (or news about it is postive), the market can focus on any positive news that reinforces the fantasy of the “V.”

Bad news about COVID-19, on the other hand, puts the fantasy of a V-shaped recovery at obvious risk, since that is what slammed the economy and stock market down in late February and March.

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