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Sun Sep 13, 2020, 09:09 AM

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

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Reply The stock market is detached from economic reality. A reckoning is coming. (Original post)
Zorro Sep 2020 OP
duforsure Sep 2020 #1
hydrolastic Sep 2020 #2
BlueWavePsych Sep 2020 #3

Response to Zorro (Original post)

Sun Sep 13, 2020, 10:45 AM

1. When it gets exposed how many trillions are being printed up

For trumps political purpose to prop the markets up at our expense , there will be outrage, and the markets will fall, and be even worse. Trumps desperate to hide the trump depression that's coming.

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Response to Zorro (Original post)

Sun Sep 13, 2020, 11:44 AM

2. Surprise! Its just what Republicans do.....

Every R term its a mess. As horrific and huge corona 19 is... Trump still had the economy's "engine" artificially juiced up and running at full rpm. It broke! Now the pushrods are bent and its barely running. Who knew that would happen?

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Response to Zorro (Original post)

Sun Sep 13, 2020, 12:28 PM

3. Correction Makes Speculators Even More Speculative

  • When markets are pushing extremes, it seems like it is a "no-lose" scenario for investors. It is at those moments when "selling high" becomes opportunistic, but is incredibly hard to do for the "Fear Of Missing Out (FOMO)".

  • With the potential for a disruptive political election, weakening economic data, and a failure to garner more stimulus for households, the risks to earnings and growth have increased.

  • Sometimes, the best investment strategy is knowing when to stop. Remember, no rule states you can't play again tomorrow after a hot meal and a good night's sleep.

  • https://seekingalpha.com/article/4373930-correction-makes-speculators-even-speculative

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