An economic recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale natural or anthropogenic disaster (i.e. the COVID-19 pandemic). In the U.S., it is defined as “a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales,” according to the National Bureau of Economic Research.
The two milestones on Monday illustrate how an 11-week surge in stocks has occurred despite widespread economic devastation fueled by the coronavirus pandemic.
Driven higher in recent months by surging technology and communications stocks, the Nasdaq .IXIC closed up 0.8% on Monday at 9,924.75 points, exceeding its previous record high on Feb. 19, just before fears of the coronavirus ended its 11-year bull market.
Stocks added to gains late in the session after the U.S. Federal Reserve eased the terms of its “Main Street” lending program.
The index’s 44% climb from its March 23 low stands in contrast to sharp deteriorations in gross domestic product and other economic indicators as a result of nationwide lockdowns, which are now easing.
MacDailyNews Take: Obviously, despite the expected U.S. recession, the majority of investors are focusing on the massive government stimulus and betting on a V-shaped, or at least relatively rapid, economic recovery as COVID-19 shutdowns are finally lifted.