Mildly hopeful economic signs like positive gross domestic product only hide the ugly truth that the United States has entered "a Depression, and not just some garden-variety recession," Gluskin Sheff economist David Rosenberg says.
Writing in a note to investors, CNBC reports that Rosenberg noted that a series of positive GDP reports and sharp stock-market gains such as have recently occurred also happened during the Great Depression, triggering a mistakenly "euphoric response."
"Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times," Rosenberg says.
He notes there were six quarterly GDP bounces with an average gain of 8 percent during the 1929-33 recession, which sent the stock market to a 50 percent rally in early 1930 because investors believed the worst was over.
"We may well be reliving history here,” says Rosenberg. “If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3 percent."
"It's not too late, by the way, to shift course if you have stayed long this market."
Federal Reserve Bank of Chicago President Charles Evans acknowledges that the economic recovery is “extremely modest” but says he believes it’s unlikely the economy will fall into a double-dip recession, The Wall Street Journal reports.
© Moneynews. All rights reserved.