I Ran the Numbers Again. Stocks Are Not the Economy.
Even when using an equal-weight measure for the S&P 500 and not adjusting for inflation, there is no correlation between the market and GDP.
Disconnected.
Photographer: Angela Weiss/AFP/Getty Images
Ever since U.S. stocks began rebounding from their depths of late March, there has been a glaring, and many would say disturbing, disconnect between the devastating impact of Covid-19 on the economy and the celebratory mood of the stock market. Seven months later, that disconnect is as deep as ever. The virus continues to plague the economy and the well-being of millions of Americans while the market marches higher.
And the truth is, there’s nothing unusual about it. As I pointed out in June, the market and the economy have rarely moved in tandem, and for good reason: The market is not the economy. Its job is to tabulate investors’ consensus view about the future of publicly traded companies. It pays no attention to private businesses or government or other important parts of the economy.