On 23 March, it closed the US stock markets the day after a several-week jump of almost 30%. This decline coincided with a wave of lockdowns across the country, as well as similar movements in Europe, Latin America and South Asia. Since then, the US economy is in free fall, with more than 26 million people filing for unemployment, waves of retail stores on the edge of bankrupt companies, energy and oil poised to limit, traveling on the ground, GDP -4.8% in the first quarter and this quarter is likely to be much worse. The stock market? Overall, stocks of all indices by more than 30% from the lowest point at the end of March. What is going on? How can it be that shot up stocks when the economy crashes? market movements are often head-scratching, but in this case the answer is relatively simple: when it moves through the Federal Reserve, financial markets are flooded with money, huge, money supply water pipe. Since March, the Fed has committed to pay billions of dollars of financial assets or buy, according to some estimates, the US dollar could be more than $8 Katherine by the time all is said and done, and the end. No one knows how to climb that number. By comparison, during the last financial crisis of 2008-2009, the Fed ended add about $3 Katherine over several years. It is not just the Fed. Congress has awarded nearly $3 Katherine in economic aid; the Bank of Japan is about the same as the Fed for the third largest economy in the world; The European Central Bank is not far behind, and governments around the world are attracted. The result is that you can freeze like a real economy and implode in the current financial markets from a liquidity tsunami is supported. ahead for stocks and bonds to see that the problems that many investors or sharp spikes in inflation or terrible billing. Respected investor Jeffrey Gundlach, one of the most influential bond manager warned this week that the markets soon going south quickly and people should be more “cautious panacea.” The premise of the Bank of America analysts that the recent market strength is simply a Bounce alley cat like the one in 2008, before a high-intensity incident happened at the end of this year. Others believe that all the liquidity is not in the world to the collapse of real economic activity and these moves by the Fed and the government the equivalent of flooding to compensate for a drought affected area with water for several days. It feels like a relief, but if there is no rain in the following months, it does little good. Yet it is something else that should give pause to the belief that the market power of a head fake. When it was floated just over a sea of money, then you might think that stocks would rise across the line. This is not the case. In fact, you endure a dramatic difference in how individual companies that estimates reflect cold eyes like a world pandemic. Companies that are particularly at risk to see the retail shops like shopping malls, see the 50% decline and have won only marginally, from March 23. The Gap, Macy, Michael Kors, all face daunting prospects and no amount of liquidity the financial paper it comes to this. Energy companies, the need to reduce loads of oil and high debt, in some cases, on the verge of bankruptcy, and the survivors as oil services giant Schlumberger (based in Houston) has seen its shares more halved since March. The same is true for airlines and hotels. Yes, plane finally JetBlue flight and the passengers have, but there is no guarantee that they are managed by a company called JetBlue two years from now. On the other hand, clear beneficiary of the uprising in the course are doing well. Five Mega-tech companies – Amazon, Apple, Microsoft, Facebook and Google – more than 30% since mid-March alone make up $5 Katherine market capitalization and Amazon has especially since the stock. Costco and Clorox have seen with thriving business Walmart, as well as video conferencing company Zoom. So while the markets do not move to real-time economic fundamentals, they move in a reasonable way judgments about the future and the distinction between the branches, one of which is the most affected eye, which could also benefit from the dramatic economic dislocations, which COVID-19 create answers. If everything would go up indiscriminately, which would show the markets have been completely replaced. There is nobody. And for those who – understandably – all this may yet further evidence that, once again, the financial world is sacrificed at the expense of millions of real people and millions of small businesses will be saved received, this time is different. The Fed, for example, has committed hundreds of billions of dollars of municipal bonds purchase on favorable terms that the short countries of liquids should mean can also keep teachers and police officers and programs if Congress negligence proves to Mitch McConnell seems to be pushing. This means that pensions remain in the public sector. The Fed is to pay 500 billion to Main Street businesses also have another $that come too late to avoid the pain of last month, but after strong move more thing on the ability of firms in the face and then summarize. The most important effect of the money is in motion now, the stock market, but that will not be the only beneficiaries, as more Fed money goes to states and Main Street. So while it seems crazy that the markets are relatively well as burns of the global economy, there is a method to the madness that some potentially positive reality reflects an otherwise dark time. This can only be a small consolation, but it is a clear reminder that as bad as things stand right now, could actually be much worse. It is updated here with our daily newsletter crown.
stocks recover as the economy collapses. This makes more sense when you think.
