Insanity? Markets continue disconnect from economy and society
It’s hard to ignore the protests on the streets of the world’s cities of late. Those protests are coming from a populace who knows that the system they live under long ago stopped benefiting them. While the focus has been the senseless killing by police of an African-American man—all of which was caught on video—there are many other grievances: legalized financial theft by the one percent from the rest of us comes to mind, something that has resulted in growing and egregious inequality across the world.
It’s also hard to overestimate the hardship visited on the world’s people as many have been deprived of income and daily life by up to three months of pandemic-inspired stay-at-home orders and retail shutdowns. As I mentioned in my previous piece, the U.S. Federal Reserve Bank of Atlanta does a frequently updated estimate of U.S. GDP which as of this writing is minus 53.8 percent for the second quarter. (That’s annualized and seasonally adjusted.) The estimate for the current quarter started at minus 12.1 percent and has been dropping like a stone with each new piece of information. For comparison, U.S. GDP during the 2008-2009 financial crises shrank by only 4.2 percent.
And yet, the world’s stock markets are behaving as if the protests and the deprivation are inconsequential. After crashing in March in the wake of the spread of the coronavirus pandemic, major stock market indices are at or near all-time highs. For example, the S&P 500 Index was last around its Friday closing price on February 24, before the coronavirus pandemic market panic. How can this be explained?
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