Perhaps this is very obvious to the readers of this blog, but I feel that I should mention this anyway. My recent post focused on the connection between "green shoots" and the "second derivative"; but I never explained why.
There is an implicit assumption at play here. The market is assuming that we will have a U or V shaped recession. Because of that assumption they are assuming that the second derivative change is a sign of slowing downfall, and consequently a turnaround will be visible as an expansion of the first derivative. But that is only an assumption. This is important to note and remember.
The economy could easily slow the rate of decline and then speed up the rate of decline again. To use this information as a basis for making buy/sell decisions should be considered speculation, and not an investment.
