Where are we now in the Business Cycle?

Amidst all the doom and gloom from the various news media on COVID-19 and the impact on Q2 GDP from each region and the increasing number of job losses, what does it mean for all of us? 

As shared in my previous post, GDP for Q2 were totally decimated and likely so as most of the major developed countries went through a national lock down and most businesses were unable to operate in such a mode since March to May. It was also noted that almost $11 billion in GDP was lost during the lock down. 

The diagram above shows a typical business cycle where we see growth, stabilization, decline, recession and slump, recovery and growth again. As news media normally does not analyze or perform forward looking views, we are normally looking at historical data/information that they will present. In this case we were all looking at Q2 GDP numbers and recent earning reports from major US companies for Q2. Even for job losses and retrenchments, these are backward looking information as well. If one uses the news media as the basis, we would think that we are at the start of the recession cycle. 

Frankly I was unable to find more data points to determine exactly where we are at, but based on the weekly job claims which shows a smaller number on a weekly basis, we would see that it should be at the lower end of the recession than the higher end as job losses should intensify at the start of the cycle and not at the end of the cycle. Looking at this Bloomberg article posted in July, we see a large number of businesses closing down and again, this is historical information and not real time information as we do not have the information on how many businesses are closing down at this point in time and how many businesses are potentially created as well. 

Source: Bloomberg

With countries opening up and businesses starting to resume, this should mean we are close to the bottom or start of the recovery. One condition that may result in the start of the recession trend would likely be another lock down which will likely resume in business closure of existing companies as lock down only benefits certain companies like Amazon but not the broader mom and pop shops. The Stock market is normally a barometer of the future and thus we are seeing a broader up move despite all the doom and gloom in the news media. 

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!