Why are stock markets holding on but the economy is not?

https://www.vox.com/covid-19-coronavirus-economy-recession-stock-market/2020/5/6/21248069/stock-market-economy-federal-reserve-jerome-powell

I wondered that myself. The easy answer is the Fed propping up the market. Along with tax cuts financed by debt, we are up to our collective butts in printed money. Are we a financial Potemkin Village?

13 thoughts on “Why are stock markets holding on but the economy is not?

  1. I’d agree on the whys you mention and like Potemkin reference, although assume it was in jest.

    The “real” money is propping up the markets as long as they can to milk it for all it’s worth.

    The automatic triggers they have in place will let them bail when the fit hits the shan and while they’ll lose some paper value they’ll offset it with the profits they have been taking for the last few months…

    Liked by 1 person

  2. The economy is immediate, but the stock market is forward-looking. For some high volume traders, that is only hours or days forward, for others it is years of decades, and all in between.

    Investors know this will pass, and though some things will be different, good companies will adjust and prosper.

    So, they are pricing it at what they expect down the road.

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    1. If what you say is true, then why should the fed pump trillions into bond markets when lending rates are already at rock bottom. It seems guaranteeing debt is a call for disaster when companies start bailing out into bankruptcy.

      I’ll be the first to acknowledge that my expertise is this area is equal to that which I have in astrophysics.

      Can you relate it to f-stops? 🤓

      Liked by 1 person

      1. The only accurate comment from Donald was that the Markets are “forward looking”, but I’d add “generally”.

        However, that has little to do with the profit taking (I’d describe as skimming) that is taking place as the small investors are being “played”.

        Bottom line: the Administration/GOP have provided the tools big money needed to game the system and they’re using them…

        Liked by 1 person

        1. See that I understand.

          It seems the fast f1.2 lens has a few .9 ND (neutral density, meant to cut light). filters mounted on the front.

          Things look dim and it takes a long time to get a clear picture.

          About like the economy.

          Liked by 1 person

    2. IMHO, the stock market is holding on because enough people do not yet understand how much worse this pandemic is going to get. And a lot of that can be laid at the door of Mr. Trump. The removal of the revised IHME forecast from the CDC web site is just an example of how the administration is busy blurring the picture for very short term political reasons.

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        1. @Tabor

          My serious answer is that I never got back in, missed possible gains if I had had perfect knowledge, but in the end lost very little. So, already not playing.

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  3. As you know “bailing” would be a mistake, but it will get worse before it gets better.

    My bigger concer is the Administration trying to tie the Market to the ACTAUL economy, which have little to do with one another at this point.

    Liked by 1 person

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