Observations

Yesterday's economic report was good news indeed.  The expected 33 percent annualized rebound is evidence of a partial recovery from the Trump economic collapse earlier this year. 

Before you pop a celebratory bottle of the bubbly it is useful to remember that this is a bounce off the bottom.  Furthermore, even including this rebound the economy shrank 3 percent from the third quarter of 2019 to the third quarter of this year. This decline is among the largest recorded recessions over the last half-century - eclipsed only by the 3.9 percent decline hit in the second quarter of 2009 during the financial crisis and subsequent Great Recession. 

From a strictly numbers perspective we would have needed 46 percent growth in the third quarter just to get back to where we were.  Getting the economy back to where it would have been without the impact of Trump's Covid mismanagement would have taken a 63 percent gain in the third quarter. 

Nevertheless, these numbers are evidence that stimulus policy has had a positive impact. The federal government borrowed a shit load of money and sent it out to individuals and businesses and it worked very well.  

As for the current decline we are witnessing in the stock market this is most likely a consequence of a combination of factors.  Namely a virus picture that is worsening and a lack of confidence in the Trump administration's response (or lack thereof).  Add to this the absence of any progress towards a further stimulus deal - which will translate to much weaker fourth quarter growth. So weak that we run a very real risk of tipping back into a double dip recession. 

Stay-tuned…..