Crashing Economy, Rising Stocks: What's Going On?
Whats bad for America is sometimes good for the market.The economic news has been terrible. Never mind Wednesdays G.D.P. report for the first quarter. An economy contracting at an annual rate of almost 5 percent would have been considered very bad in normal times, but this report only captured the first few drops of a torrential downpour. More timely data show an economy falling off a cliff. The Congressional Budget Office is projecting an unemployment rate of 16 percent later this year, and that may well be an underestimate.
Yet stock prices, which fell in the first few weeks of the Covid-19 crisis, have made up much of those losses. Theyre currently more or less back to where they were last fall, when all the talk was about how well the economy was doing. Whats going on?
Well, whenever you consider the economic implications of stock prices, you want to remember three rules. First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy.
That is, the relationship between stock performance largely driven by the oscillation between greed and fear and real economic growth has always been somewhere between loose and nonexistent. Back in the 1960s the great economist Paul Samuelson famously quipped that the market had predicted nine of the past five recessions.
https://www.nytimes.com/2020/04/30/opinion/economy-stock-market-coronavirus.html
Squinch
(50,911 posts)so they can become wealthier and more powerful.
Propping up the US stock market for a few months ain't no thing for them.
Wellstone ruled
(34,661 posts)99% of all the so called Stimulus Money went to Wall Street. Remember,the Street lost 20+ trillions and has gained back 4+ trillion.
jimfields33
(15,682 posts)I bought a bunch of stocks a few weeks ago due to the price being so low. These are companies that will come back and already the are 50 percent higher on the stock price. Could some go belly up. Maybe. And if that happens, then I lost some money. But important use money you can still live if you lose it.
Shermann
(7,399 posts)The street is writing it off as a black swan event.
The real question is what the third and fourth quarters will look like.
Trump predicts they will be OK and then great quarters, but he's batting zero on his predictions.
It's a tug-of-war between the fear of losing money and the fear of missing out.