Weekly Market Update - August 21
This week, the S&P 500 reached both an intraday all-time high and closing all-time high, before going down. Since March, we have been consistently and gladly reporting stock gains in these communications. While a rising market in a bad economy feels counterintuitive, the following graph from Charles Schwab helps explain why stocks have been consistently going up over the past five months. It shows the clear difference between actual second-quarter gross domestic product (GDP), and third-quarter GDP estimates for some of the largest global economies. GDP growth measures the change in a country’s economic production during a period of time.
It’s not surprising that Q2 GDP was awful, given the prevalence of lockdowns and vast reductions in economic activity. In many cases, these numbers are the worst since the Great Depression. Yet even during this time, stocks were increasing, forecasting the beginning of the economic rebound. Even though we’re a little over a month away from the end of Q3, data shows that the rebound has already begun.
While it may not seem like it today, better days are ahead. Many aspects of our lives are not back to normal, and may not be for some time. The economy is also not back to normal, but it’s on its way.