You would never know how terrible the past year has been for many Americans by looking at Wall Street, which has been going gangbusters since the early days of the pandemic.
“On the streets, there are chants of ‘Stop killing Black people!’ and ‘No justice, no peace!’ Meanwhile, behind a computer, one of the millions of new day traders buys a stock because the chart is quickly moving higher,” wrote Chris Brown, the founder and managing member of the Ohio-based hedge fund Aristides Capital in a letter to investors in June 2020. “The cognitive dissonance is overwhelming at times.”
The market was temporarily shaken in March 2020, as stocks plunged for about a month at the outset of the Covid-19 outbreak, but then something strange happened. Even as hundreds of thousands of lives were lost, millions of people were laid off and businesses shuttered, protests against police violence erupted across the nation in the wake of George Floyd’s murder, and the outgoing president refused to accept the outcome of the 2020 election — supposedly the market’s nightmare scenario — for weeks, the stock market soared. After the jobs report from April 2021 revealed a much shakier labor recovery might be on the horizon, major indexes hit new highs.
“On the streets, there are chants of ‘Stop killing Black people!’ and ‘No justice, no peace!’ Meanwhile, behind a computer, one of the millions of new day traders buys a stock because the chart is quickly moving higher,” wrote Chris Brown, the founder and managing member of the Ohio-based hedge fund Aristides Capital in a letter to investors in June 2020. “The cognitive dissonance is overwhelming at times.”
The market was temporarily shaken in March 2020, as stocks plunged for about a month at the outset of the Covid-19 outbreak, but then something strange happened. Even as hundreds of thousands of lives were lost, millions of people were laid off and businesses shuttered, protests against police violence erupted across the nation in the wake of George Floyd’s murder, and the outgoing president refused to accept the outcome of the 2020 election — supposedly the market’s nightmare scenario — for weeks, the stock market soared. After the jobs report from April 2021 revealed a much shakier labor recovery might be on the horizon, major indexes hit new highs.
The disconnect between Wall Street and Main Street, between corporate CEOs and the working class, has perhaps never felt so stark. How can it be that food banks are overwhelmed while the Dow Jones Industrial Average hits an all-time high? For a year that’s been so bad, it’s been hard not to wonder how the stock market could be so good.
To the extent that there can ever be an explanation for what’s going on with the stock market, there are some straightforward financial answers here. The Federal Reserve took extraordinary measures to support financial markets and reassure investors it wouldn’t let major corporations fall apart. Congress did its part as well, pumping trillions of dollars into the economy across multiple relief bills. Turns out giving people money is good for markets, too. Tech stocks, which make up a significant portion of the S&P 500, soared. And with bond yields so low, investors didn’t really have a more lucrative place to put their money.
To put it plainly, the stock market is not representative of the whole economy, much less American society. And what it is representative of did fine.
“No matter how many times we keep on saying the stock market is not the economy, people won’t believe it, but it isn’t,” said Paul Krugman, a Nobel Prize-winning economist and New York Times columnist. “The stock market is about one piece of the economy — corporate profits — and it’s not even about the current or near-future level of corporate profits, it’s about corporate profits over a somewhat longish horizon.”
Still, those explanations, to many people, don’t feel fair. Investors seem to have remained inconceivably optimistic throughout real turmoil and uncertainty. If the answer to why the stock market was fine is basically that’s how the system works, the follow-up question is: Should it?
“Talking about the prosperous nature of the stock market in the face of people still dying from Covid-19, still trying to get health care, struggling to get food, stay employed, it’s an affront to people’s actual lived experience,” said Solana Rice, the co-founder and co-executive director of Liberation in a Generation, which pushes for economic policies that reduce racial disparities. “The stock market is not representative of the makeup of this country.”
Inequality is not a new theme in the American economy. But the pandemic exposed and reinforced the way the wealthy and powerful experience what’s happening so much differently than those with less power and fewer means — and force the question of how the prosperity of those at the top could be better shared with those at the bottom. There are certainly ideas out there, though Wall Street might not like them.
by Emily Stewart, Vox | Read more:
Image: Vox
To the extent that there can ever be an explanation for what’s going on with the stock market, there are some straightforward financial answers here. The Federal Reserve took extraordinary measures to support financial markets and reassure investors it wouldn’t let major corporations fall apart. Congress did its part as well, pumping trillions of dollars into the economy across multiple relief bills. Turns out giving people money is good for markets, too. Tech stocks, which make up a significant portion of the S&P 500, soared. And with bond yields so low, investors didn’t really have a more lucrative place to put their money.
To put it plainly, the stock market is not representative of the whole economy, much less American society. And what it is representative of did fine.
“No matter how many times we keep on saying the stock market is not the economy, people won’t believe it, but it isn’t,” said Paul Krugman, a Nobel Prize-winning economist and New York Times columnist. “The stock market is about one piece of the economy — corporate profits — and it’s not even about the current or near-future level of corporate profits, it’s about corporate profits over a somewhat longish horizon.”
Still, those explanations, to many people, don’t feel fair. Investors seem to have remained inconceivably optimistic throughout real turmoil and uncertainty. If the answer to why the stock market was fine is basically that’s how the system works, the follow-up question is: Should it?
“Talking about the prosperous nature of the stock market in the face of people still dying from Covid-19, still trying to get health care, struggling to get food, stay employed, it’s an affront to people’s actual lived experience,” said Solana Rice, the co-founder and co-executive director of Liberation in a Generation, which pushes for economic policies that reduce racial disparities. “The stock market is not representative of the makeup of this country.”
Inequality is not a new theme in the American economy. But the pandemic exposed and reinforced the way the wealthy and powerful experience what’s happening so much differently than those with less power and fewer means — and force the question of how the prosperity of those at the top could be better shared with those at the bottom. There are certainly ideas out there, though Wall Street might not like them.
by Emily Stewart, Vox | Read more:
Image: Vox
[ed. See also: Counting the Chickens Twice; and, Always a Reckoning (Hussman Funds).]
