April’s job losses amounted to a historic 14.7 percent unemployment rate, the highest since the Great Depression. Yet stock markets, often relied on as a forecast for the global economy, rose sharply on the day that unemployment numbers were released. The S&P 500 is down less than 14 percent from its peak in February, compared to a loss of nearly 40 percent during the Great Recession. The annual rate is down by 9.3 percent – a number that investors say they would normally consider a correction.
The uptick is due in part to investors’ focus on the long-term outputs of the economy, industry experts say. While the jobless report is grim, investors do expect a recovery in the months and years ahead. Still, some market analysts say the disparity between Wall Street’s more rosy outlook and the financial despair felt across the nation reflects a growing disconnect between those massive corporations and the average American business.
About 40 percent of the revenue that goes to highly profitable S&P 500 companies doesn’t even come from U.S. markets, according to The New York Times. Tech giants, many of which are some of the largest listed companies, have emerged from the pandemic as some of the biggest winners. Meanwhile, the nation’s industrial economy faces permanent shutdowns at production factories for goods such as dishware, tires, and motorcycles, while small businesses sing a tune of “fear and desperation” as they struggle to acquire federal aid while reopening under social distancing regulations.
As “Main Street America” gets hit by unemployment, the stock market has rallied back – CBS News – 5/8/2020
“This is hitting the lower 60% of the economy much harder than it’s hitting the upper 40% of the economy,” Stacy said. “And of course, we have the stock market that’s up, and so this coronavirus discrepancy is really much harder on people that already are suffering from our wealth gap.”
Why the stock market is up even with historic job losses – CNBC – 5/8/2020
Strategists also point out that the losses have been somewhat concentrated in the leisure and hospitality sector, whose underperformance has overshadowed strength in other areas of the market. And with the government and federal reserve providing record stimulus measures, some argue that once businesses do get back up and running, the recovery will be swift.
The Bailout Is Working — for the Rich – ProPublica – 5/10/2020
If you’re looking for investors’ verdict on who has won the bailout, consider these returns: Shares of Apollo Group, the giant private equity firm, have soared 80% from their lows. The stock of Blackstone, another private equity behemoth, has risen 50%. The reason: Asset holders like Apollo and Blackstone — disproportionately the wealthiest and most influential — have been insured by the world’s most powerful central bank. This largess is boundless and without conditions.
5 reasons why you shouldn’t freak out about 20.5M job losses – USA TODAY – 5/8/2020
Bank of America, the second-largest bank by assets, is seeing signs that consumer spending is ticking higher after plunging 30% at the start of the lockdown, as consumers buy more clothing, gasoline and restaurants meals.
Dare Obasanjo on Twitter, 5/11/2020: If you’ve wondered why the stock market is up when the economy is down (14.7% unemployment, lockdowns, etc), you should keep in mind the gains and pain are not evenly distributed. Tech & grocery stores are blowing up while travel, retail and non-digital entertainment are way down… https://t.co/rXzQYr7upn
Carl Quintanilla on Twitter, 5/11/2020: Three reasons why unemployment will be below 6% by Election Day, from @MaMoMVPY: “.. market economies emerge much faster from negative supply shocks than from demand shocks.” (h/t MKM) https://t.co/Lxk5oAuhmG
Amy McGrath on Twitter, 5/11/2020: Kentucky is the #1 state for unemployment claims filed since March 1. We need federal aid for people, not billion dollar corporations, now. https://t.co/WrOo7LNU3A
Ken Fisher on Twitter, 5/11/2020: Quote for the Day: “In the near-term unemployment will rise, business activity will falter, and headlines will continue to be scary. So…I’ve been buying American stocks”-Warren Buffett in 2008. #KFQuoteForTheDay… https://t.co/gStIxG95NU