Harrison: The Recession is Over
Your Real Vision Daily Briefing for June 16, 2020
Ash Bennington joins Ed Harrison to unpack today’s positive retail numbers as well as whether the recession is now “over” (even if in name only).
- The market is back in bullish mode and with retail sales up 17.7% in May versus April, the recession is over.
- Though things look better in the immediate, this may simply be the period of uplift in what will eventually be a “double dip” recession if the future virus trajectory has a negative impact on consumer behavior.
- The Fed is actively creating inequality by favoring Wall Street over Main Street.
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Positive retail numbers and strong stock market performance suggest that last week’s selloff was a blip and that people are feeling positive about our prospect for recovery, Ed Harrison said during today’s Real Vision Daily Briefing.
He said we’re back in bullish mode, and the 17.7% bump in retail sales tells us at a minimum that output is likely to be higher in May than in April, which suggests that the recession is over.
“A recession is a decline from the peak to the trough and we’ve hit the trough and now we’re bouncing up so dramatically that you have to say it is over,” he said.
Now, we will have to wait and see what virus looks like post lockdown. Harrison said that if cases surge and the negative data influences consumer perception and alters behavior, there’s the potential for a “double dip” recession. So while the recession that begin in February has ended, we may actually be in the middle of a depression.
Jay Powell’s testimony before the Senate Banking Committee today reminded us that a long, slow recovery isn’t off the table, Harrison said, but what he found really interesting was how Powell talked about inequality just one day after the Fed announced that they’re buying corporate bonds.
Harrison said there’s nothing wrong with corporate bonds – in fact, we’ve had more than a trillion dollars of issuance – which means that the Fed isn’t buying out of necessity to help liquidity in a gummed up corporate bond market. Rather, it is actively favoring Wall Street over Main Street.
This is happening as the increased unemployment insurance and credit card and mortgage forbearance programs under the CARES Act are set to expire this summer.
Harrison thinks the Fed should dial back on junk and corporate bonds and if there’s something to be done, they need to let Main Street benefit as opposed to Wall Street.