1 to 7 June: All that glitters is not gold

The saying in the title applies to the latest jobs report in the US, which was released on Friday. Although the headline labour market figures did not look as dire as the consensus estimated, the stock market’s exceptionally positive reaction to the report feels very much to be at odds with the economic reality in the US. In May, non-farm payrolls rose by 2.5 million, whilst the official unemployment rate declined to 13.3%, but remember that the number of employed people in the US is lower by almost 20 million since February. Although this crisis is not the same in nature as the Great Financial Crisis (GFC) was, it is one of the very few reference points we have. At the time of the GFC, it took about 3.5 years to recoup the economic losses in terms of real GDP in the US. As the S&P 500 is virtually flat year-to-date, the question arises whether the stock market is taking the view that ‘this time is different’ and everything is going to be fine very soon or purely that the index itself is no longer a fair representation of the broader US economy.

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