So here we are….in the middle of a global pandemic. Unemployment in the US is hovering around 15%. Businesses are struggling to remain viable. Hundreds of thousands of families…probably millions …are concerned they won’t be able to make their mortgage payments.
Yet, the stock market is closing in on all time highs set earlier this year.
How is that possible? What gives?
The party line answers sound something like:
- “Stocks prices reflect future earnings, not present earnings”
- “COVID-19 is temporary, and our economy will return as soon as it passes”
- “The market is just being manipulated by the Fed. All that cash is pumping up the market”
All these are reasonable responses. But they circumvent a very important concept that many of us seem to be forgetting recently:
The economy is not the stock market, and the stock market is not the economy.