The stock market is detached from economic reality. A reckoning is coming.

Wealthy investors and the Fed have been propping up large companies. It can’t last.

By Heather Boushey

When the stock market surged early this month, President Trump was quick to tweet, “The Dow Jones Industrial just closed above 29,000!” The picture changed a bit after the Dow slid more than 800 points a few days later. But the stock market is a continuing obsession of Trump’s. “We have the strongest . . . economy in the world,” he said last month, boasting of market gains in the midst of the deep recession caused by the coronavirus.

It’s understandable that the president wants to use the markets as a measure of the economy’s health, even as unemployment hovers at 8.4 percent and many businesses remain crippled. Since the start of the year, the S&P 500 — even following the recent drop — is up 2.5 percent, and the Dow is down a mere 4 percent. If stocks were the sole measure of economic health, you might think the economy was on the mend, perhaps even poised for a breakout.

The president and his supporters are ignoring what former Federal Reserve chair Janet Yellen forcefully explained recently: “The stock market isn’t the economy. The economy is production and jobs, and there are shortfalls in virtually every sector.” How have stocks remained so resilient in the face of such a severe shock? In part, it’s because of inequality. Stocks are overwhelmingly owned by the top 1 percent, which means speculation has been able to continue even as more people have lost their jobs than at any time since the Great Depression.

What’s more, measures such as the Dow and the S&P 500 reflect only the very largest U.S. companies, which can weather steep slumps in demand in a way that Main Street enterprises can’t — while the relief packages Congress passed this spring were better at shielding large companies from economic harm than smaller ones. Given how troubling the underlying economic data are, the immunity of the markets can’t continue (as this past week’s decline may suggest).

https://www.washingtonpost.com/outlook/stock-market-unemployment-disconnect/2020/09/09/087374ca-f306-11ea-bc45-e5d48ab44b9f_story.html