Atypical crisis recovery | The duty

The outgoing Governor of the Bank of Canada, Stephen Poloz, recently said that the crisis was exaggerated, that the pessimism was a little extreme. And Wall Street has just proved it right. However, not everything is won.

Galvanized by a surprise drop in unemployment in the United States in May and by a historic unemployment rate in Canada masking a renewed confidence in the job market, Wall Street has just wiped out its heavy loss caused by the pandemic and restrictions and containment measures pausing about half of global GDP. Over the week, the Dow Jones appreciated 6.8%, the Nasdaq 3.4%, and the S&P 500 4.9%. They have all taken more than 40% since the air hole it took in March, Agence France-Presse tells us.

In Toronto, the S & P / TSX Composite Index, heavily influenced by oil, still hit a three-month high on Friday to end the week with a gain of nearly 4.4%. The benchmark is just 12% off its historic February peak, The Canadian Press tells us.

In short, the 33.9% drop (from peak to trough) of the US S&P 500 index, in just 33 days, is ultimately erased.

Stephen Poloz spoke of this distortion in the perception that can be caused by using the main traditional economic indicators to measure a recession that is nothing traditional or typical. The GDP and even the unemployment rate offer an alarmist reading, but without representing the famous principle according to which “we are not in a normal recession. The fall in GDP does not reflect a profound change in the behavior or confidence of economic actors. Governments have put the economy on hold. ” When they lift their containment measures, “we can expect a rapid return to activity,” read in The duty.

Wall Street echoes this, with a look at past recessions. According to data from Bloomberg-TD Bank, the S&P 500 fell 86.2% in 1026 days (from peak to trough) during the Depression of 1929, 54.5% in 386 days in 1937. Closer to home , the plunge was 49.1% in 929 days in 2001, 56.8% in 517 days during the Great Recession of 2008.

One of the big differences this time is this tough intervention by central banks in the financial markets to prevent a drying up of liquidity and to avoid imbalances. An action combined with the multiplication of budgetary programs targeting individuals and businesses.


The results of an Angus Reid poll published this week, conducted from May 19 to 24 with 5,001 respondents, testify to the effectiveness of these actions. We observe that 32% of respondents say they are in a worse financial situation than a year ago, a rate comparable to data from previous years. However, 58% of them doubt the ability of the Trudeau government to avoid an even deeper recession or more serious damage to the economy. And 71% fear that their personal finances will deteriorate over the next 12 months.

It is true that all these government efforts will add to the public debt in the coming years, while the deferral of payments will not be without consequences for many households. Just over 18% of them missed or delayed a rental payment, mortgage, loan or credit card due to COVID-19, it was reported last Saturday.

In addition to these barriers to savings and future consumption, there is the risk that a second wave of the COVID-19 pandemic will hit the Canadian economy. In fact, 51% of survey respondents say they are concerned that more Canadians will be hit by COVID-19, and 49% say that further deterioration in the economy is their main concern. For respondents, the top three issues in Canada are health care, the economy and the response to the pandemic. Climate change is coming out of the top three for the first time in 15 months, says the Angus Reid Institute.

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