- The Dow and S&P 500 have rocketed off their recent lows.
- But one economist says that mega-cap stocks are masking pain in the broader market – especially in the small-cap segment.
- That’s a bad sign for the economy, and it might be even worse for the stock market.
As the U.S. stock market closes the book on one of its worst quarters in history, the mood on some corners of Wall Street is surprisingly upbeat. The Dow Jones has rocketed almost 20% off its lows, while the S&P 500 has bounced more than 15%.
A growing chorus of analysts proclaim that the stock market crash is over, and even cautious strategists say the “sell everything” moment has passed. But Wall Street’s most stubborn bear refuses to concede the point.
David Rosenberg predicts the coming economic recession could be twice as ugly as 2008, and he says the evidence is staring investors straight in the face. They’re just too dazzled by other corners of the stock market to see it.
This Stock Market Index Sends an Ominous Warning About the Economy
The Rosenberg Research chief economist says that there is a stock market index that “tells you what is going to happen with the economy.” But it’s not the Dow, and it’s not even the S&P 500.
It’s the large-cap index’s “little brother” – the S&P 600. This index tracks the small-cap segment of the stock market, and if you think the Dow’s chart looks horrendous, you’ll find this one absolutely nauseating.
Rosenberg says that it’s a bad sign that historic levels of government stimulus have failed to spark a convincing recovery in small-cap stocks. He warns that this forebodes an ugly future for the economy: “Deep recession, minimal recovery.”
The S&P 600 doesn’t include the mega-caps and even with all the…