The stock market and economy have parted ways. It's a FOMO market now.

[Zorro]

It is impossible not to marvel at the apparently indestructible gap between the buoyant stock market and the less-than-buoyant real economy of workers, companies and jobs. One must say “apparently indestructible,” because maybe there is some simple and obvious explanation that eludes your correspondent. Otherwise, either the stock market is too high, or the economic outlook is too low. One or both must be wrong.

Just last week, the Organization for Economic Cooperation and Development (OECD) — a group of 36 countries — issued its forecast for the United States through 2021. It is unlikely to inspire much cheering. Acknowledging that much depends on the severity of the coronavirus, the OECD report constructs two scenarios: one that might be termed “pessimistic” and a second that is “more pessimistic.”

Under the “pessimistic” assumptions, the unemployment rate is projected at 11.3 percent at the end of 2020 and the economy (gross domestic product) falls 7.3 percent for the year. Both the unemployment rate and the GDP decline are larger than in any previous post-World War II recession. By way of comparison, the peak monthly jobless rate in the Great Recession of 2007-2009 was 10 percent.

The “more pessimistic” forecast assumes that there is a second wave of coronavirus cases. This delays the economy’s recovery and results in more deaths. In the “double-hit” scenario, the year-end unemployment rate is 12.9 percent, and the GDP drops by 8.5 percent. “The recession risks leaving behind a long-lasting negative economic impact,” the OECD warns. “Policies are needed . . . to help workers and businesses avoid scarring effects and fully recover from the crisis.”

https://www.washingtonpost.com/opinions/the-stock-market-and-economy-have-parted-ways-its-a-fomo-market-now/2020/07/12/c14246d8-c2bf-11ea-b4f6-cb39cd8940fb_story.html

[Moostache]

1. How can they even guess?

We are widely told that the current runaway breakout of COVID-19 in AZ, FL, TX and the south is not even the 2nd 'wave'...its just an extension of the first due to careless implementation of protective measures.

The true "second wave", following expert projection and historical comparison from previous pandemics (like the 1918 flu), is supposed to be WORSE than the first.

We are already in runaway infection territory...by the fall, we might not be in lock down, we might very well be in total anarchy as state and local officials and facilities are over run or destroyed and the federal response is a collective shoulder shrug and locking sound from the bunker entrance...

They do not know. They, being the investors, only want as many dupes as possible to buy into this bubble and cushion THEIR crash as they try to time the crash and speed their money out, disguised by an influx of capital from new suckers. The market is as rigged as a casino and the odds DO NOT FAVOR an average investor being sold FOMO...

Eventually there comes a reckoning...

[Firestorm49]

2. God, I hate acronyms.

I spend too much time looking up acronyms that are assumed to be known by everybody.

[yortsed snacilbuper]

3. Ditto.

[Polly Hennessey]

4. Is it, Fear Of Missing Out (FOMO)?

[Firestorm49]

6. Yes. I looked it up.

[unblock]

5. a big part of it is the government has thrown astounding amounts of money at this

in normal recessions, the fed is typically a bit slow, though often not by much, in gradually lowering interest rates. this time, they slammed it to zero immediately.

congress, meanwhile, typically passes some sort of tax cut/stimulus late in the recession, sometimes even after it's over, because it usually takes so long for everyone to agree that there actually is a recession, how deep it is, etc. this time, it was ridiculously obvious, so trillions were thrown at the problem immediately. sloppily and corruptly, of course, but enough to help some actual businesses.

another factor is that the stock market represents only public companies, which tend to be larger than many private companies. the businesses that have suffered the worst are the local businesses that can't operate without direct customer contact. these are disproportionately smaller, private companies like nail salons and single-store restaurants. so the damage here isn't directly reflected in the stock market. in fact, it's an opportunity for the larger companies as they will be able to suck up market share after the small, private companies fail.


yet another factor is that we've actually got a liquidity glut. the money has nowhere to go but in stocks, and the bigger companies are the safer ones (outside of transportation. carmakers and airlines aren't doing so well these days...).

finally, many businesses are operating surprisingly well. people still have to eat, so growers and others in the food chain are managing, although there have been challenges as people are eating at home more. but one way or another, grains and so on are getting eaten. and of course, internet-based businesses are doing great as everyone who can is working from home.

one more factor is that many big businesses are global, and they can do well if the rest of the world is more or less returning to normal, even if the u.s. is still a mess.


but yeah, the question is, what happens when people realize that the mighty consumer is broke, or that piddling little stimulus checks aren't going to be nearly enough to get us back to where we were in january?

[sarcasmo]

7. Three card Monte

[panader0]

8. 90% of stock is owned by the top 10%.

The rich, for the most part, could care less about Main Street. Their poker game has a big buy-in.
It's a special group that the vast majority of Americans have zip to do with.

[Mosby]

9. I think a lot of it is 401ks

Billions of dollars per month are shoveled into the stock market regardless of conditions, it's automatic.

That constant purchasing pressure drives stocks up.