Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

US economy 2nd quarter Olivier Douliery/AFP via Getty Images

The Big Slump

The US economy shrank at a record-high 32.9% annual rate in April-June, as the COVID-19 pandemic caused major declines in consumer spending, exports, and business investment. With infections continuing to surge alarmingly in some western and southern states, how long can the stock market put on a happy face?

In this Big Picture, Chatham House’s Jim O’Neill argues that many key short-term macroeconomic indicators still point to a V-shaped recovery, provided that major economies are not forced to shut down again. Yale University’s Robert J. Shiller, meanwhile, says investors’ crowd psychology, the virality of ideas, and the dynamics of narrative contagion help to explain why buoyant US equity stock markets continue to shrug off gloomy economic news.

But New York University’s Nouriel Roubini warns that financial markets seem to be counting on continued massive government fiscal stimulus and the arrival of a COVID-19 vaccine, and are ignoring a slew of potentially devastating risks to the global economy. 

Similarly, Anne O. Krueger of Johns Hopkins University cautions that economic activity will not return to normal until the virus is defeated, which will in turn depend on the public’s adherence to preventive measures. MIT’s Simon Johnson therefore proposes a new COVID-19 testing system that could fuel an exponential increase in the number of tests for all US residents.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

or

Register for FREE to access two premium articles per month.

Register

https://prosyn.org/ohrh8cw;

Edit Newsletter Preferences

Set up Notification

To receive email updates regarding this {entity_type}, please enter your email below.

If you are not already registered, this will create a PS account for you. You should receive an activation email shortly.