The Economy Is A Mess. So Why Isn't The Stock Market?

[Newest Reality]

We’ve said it before: The stock market is not the economy.

Usually, this simply means that fluctuations in the markets may have little to no real bearing on the underlying realities we think of as making up the economy. Or that there are many important structural factors that make the markets’ outlook different from how ordinary citizens view the country’s overall economic health.

But now, those usual bromides risk wildly understating the disconnect. In the time of COVID-19, the stock market couldn’t be more divorced from the United States’ broader economic situation. Although the S&P 500 tumbled sharply in March, as the coronavirus shut down large swaths of the economy, it had made back almost all of its losses by the first week of June — before dipping again and then quickly rebounding yet again.

Even beyond the markets, there has been some data to suggest that the worst fears about the economy in late March and April were too pessimistic. (Take May’s jobs report, for instance, which showed a surprising decline in unemployment even after accounting for a classification problem with laid-off workers.) But the overall state of unemployment is still quite bad by historical standards, which mirrors numerous important economic indicators that are almost uniformly down — to a significant degree — from last summer:

?w=2048

Obviously, not every core indicator has dropped off a cliff in the face of this recession. Inflation, as measured by the sticky-price consumer price index (excluding ever-volatile food and energy expenditures), has dipped some since February — from 2.8 percent year-over-year to 2.1 percent — but remains in a relatively normal range. New building permits (a sign of construction investment and activity) have rebounded from an initial dip and are almost back at last year’s level. And measures of credit risk, such as the TED spread, have stabilized, indicating a low implied risk of commercial-bank defaults.

https://fivethirtyeight.com/features/the-economy-is-a-mess-so-why-isnt-the-stock-market/

[HelpImSurrounded]

1. The markets profit on misery

While these are some useful indicators the underlying fact is that sophisticated investors know how to profit from the misery of others? People aren't shopping? Sell my department store stock and buy stock in medical sector.

And of course, the initial drop was due to people taking profits and selling then getting back in at the bottom.

The rich get richer while the poor get poorer and the Gini index continues to rise until a real crash happens.

[Johnny2X2X]

2. Inflated by many things

Extremely low interest rates make the markets more appealing. Fed is dumping money into the markets. Investors haven't quite figured out where there money should be right now so they're staying in the markets waiting for the right signal to move into something else.

And I think the big movers and shakers ballooned it up to take profits before they leave for a while. DOW getting hammered today, but it's still several thousand points too high IMO.

[RandySF]

3. It's a bet on the economy's future performance.

[kimbutgar]

4. The fed is buying the Dow and Nasdaq stocks though the hedge funds they bailed out

[A HERETIC I AM]

13. What?

Do you have an article that I can read that you got this information from?

Please show where you got the idea that the Federal Reserve Bank is “buying the Dow and Nasdaq stocks through the hedge funds they bailed out”

Please.

Because that sentence, while it sounds good and probably felt good to type, has absolutely no basis in any fact that I can find, and it frankly has no relation to reality.

[kimbutgar]

17. I actually heard it from a financial show a few weeks ago

You’re probably right the Fed would NEVER do that to help MF45.

[Demsrule86]

5. The market is being bailed out by the Fed.

[Warpy]

6. I can't believe people have the gall to ask this

The stock market and credit markets are flush because the top 0.1% and corporations they love are awash in cash, thanks to the largesse of the present administration via reckless tax cuts and stolen relief money.

Alternative explanations are a load of self serving codswallop from the men and institutions who benefited the most.

I can't wait to hear their silly explanations for why the prices are soaring but the dividend payouts are in the basement a few months from now.

[DBoon]

8. Life is very good for the top 0.1%

The stock market reflects this

The rest of us don't trade enough stock to matter. The other economic graphs tell our story.

[onecaliberal]

7. dump gave them at least a trillion dollars. Of course they're doing well.

[Mariana]

9. ...

[Newest Reality]

10. Ah...Ah....Ahchoo! Oops. Sorry.

[at140]

11. Stock market is always looking 6-12 months in future

It is seldom looking at current conditions.

[2naSalit]

12. Nothing a half trillion $ couldn't fix.

It's being propped up for nefarious reasons... with our money.

[struggle4progress]

14. It's America's most expensive casino!

[Roland99]

15. Myopically speaking, they're down 2 - 2.5% today so far.

[sarcasmo]

16. Three card Monte