The stock market gave a rare nod to reality this week, after Federal Reserve chair Jay Powell laid out his vision for a creeping economic recovery that will take years rather than months.
The Federal Reserve forecast that real GDP will decline 6% by the end of 2020, which is considerably worse than the loss in output from the 2008 financial crash. Output won’t return to normal till 2022, the Fed predicts, with millions of demolished jobs along the way. Powell said on June 10 the Fed will have to provide extraordinary stimulus measures for years.
Stocks closed modestly lower the day Powell spoke, but plummeted the following day, with the S&P 500 (^GSPC) falling nearly 6% on June 11, the biggest daily decline since the chaotic selloff in March. The stock market’s soaring ascent since late March has puzzled many analysts wondering how stocks can surge amid mass unemployment