RV Blog Pal: We’re Still in a Deep Recession

Pal: We’re Still in a Deep Recession

Your Real Vision Daily Briefing for June 5, 2020

Raoul Pal and Ash Bennington discuss a roaring day on Wall Street as the U.S. labor market breathed a sigh of relief.

  • Today’s U.S. jobs report bucked consensus data and prompted a rise in markets, but the positive numbers don’t necessarily mean that things are turning around.
  • The stock market may be overpricing success; by late-summer stimulus money will run out and there’s nothing that suggests the resumption of cash flows into the global economy.
  • While the physical world has taken a massive hit, the virtual world is accelerating – but it’s still not a justification for tech stock market values.


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We saw a roaring day on Wall Street as the U.S. labor market breathed a sigh of relief, but job numbers beating consensus doesn’t mean that everything will go back to normal, Real Vision CEO Raoul Pal said during today’s Daily Briefing.

Pal said that despite the U.S. economy adding 2.5 million new jobs and unemployment dropping to 13.3%, the reality is that we are still in a deep recession.

He said that the drop in unemployment could be attributed in part to the Paycheck Protection Program, which provided a direct incentive for small businesses to keep workers on the payroll.

That program, and other government stimulus, will begin to run out soon, and people seem to be forgetting that the velocity of dollars is near zero because they’re caught up in the incredible rally on the stock market.

Pal said the market may be overpricing success because there aren’t a lot of signs that there will be a resumption of cash flows to the global economy.

“We need to distance ourselves from thinking that the stock market is a macro variable,” he said. “It’s a flow variable and a behavioral variable more than anything else. It’s not the economic signal; the bond market is.”

One winner in all of this has of course been the tech industry, and Pal believes this represents a real, meaningful trend. He said that the way digitalization has taken over has shown that the world of GE is finished and the world of Amazon has just started.

Pal said that this is not necessarily a justification for market values or markets going up, but it is a secular shift that he is paying close attention to.

“The world has changed hugely,” he said.