Stock Market's Wild Mood Swings Can Be Explained by Mr. Spock
Think of the “Star Trek” character and the calm punctuated by fits of euphoria and bouts of despair will be easier to understand.
Market strategist?
Photographer: CHRISTOPHE ARCHAMBAULT/AFP via Getty Images
Clients, colleagues and even family members keep asking the same question: “Why have stocks decoupled from the economy?” These are not people who obsess over the Federal Reserve’s balance sheet or spend time with the Bureau of Labor Statistic’s birth-death model. They just want to know what's going on in the stock market.
Recently, the gulf between peoples’ daily experiences and the market has never been greater. It is a huge source of confusion. Traders are alternately exuberant and panicked, swinging markets up or down 10% in a day. In March, indexes fell 34% from record highs just a month earlier; despite horrific news about the economic blow from the coronavirus shutdowns, stocks then jumped 44% from those lows. My Bloomberg Opinion colleague John Authers describes it as the “insanity trade.”