Newspapers and TV channels across the globe are reporting on yesterday’s announcement that the US is offically in a recession.

The SFGate starts an article with a well chosen statement: “It took seven economists 11 months to decide what should seem obvious given all the foreclosures, bank failures and layoffs - the United States is officially mired in a recession.” The word recession has been used for months now, many are strong believers that the actual recession began even as early as December 2007.

These headlines have crushed the rally the U.S. stock market lived last week as confirmed by the Salt Lake Tribune: “Jones industrials plunged 679.95 points, or 7.70 percent, to close at 8,149.09. There have only been three days in market history with bigger point losses for the Dow — the Monday after the Sept. 11 attacks, and Sept. 29 and Oct. 15 of this year.” The interesting element to note here is how the stock market reacts to such an official statement as: “The U.S. is in a recession”. Most of these stock brokers are smart people, and they all surely have known this way back, why are they reacting so badly now? It was obviously only a matter of time before the government declared a recession. And why were stocks rallying last week? Because that is what the stock market is all about? How about some stability? Or should I say sustainable stability…

Image by kelnishi under Creative Commons.