Worst Economy versus Best Stock Market

The quarter with the worst economy since 1929 and the best-performing markets since 1998

Source: IMF

Wall Street ignores the economy

The contrast could not be more striking between Wall Street and Main Street. The real economy succumbs to bankruptcies and unemployment. The United States will probably see a 20% decline in this quarter and at least an 8% decline for the year 2020, according to the International Monetary Fund. However, Wall Street had its best quarter.

Wall Street ignores the profitability of companies

This table cries fool.

Source: S&P

Supply and demand, period

The Supply-and-Demand rule of Economics 101 is the dominant factor in how markets work today. They can be dealing with an economic collapse, while stocks are surging. The reason is simple: the price is the result of sufficient people wanting to buy stocks.

Share buybacks over the past years. Source: S&P.

The US Federal Reserve is manipulating the market

The recent actions of the Federal Reserve completely ignore the fact that the economy could not absorb $3 trillion in a few weeks. This $3 trillion Fed present had to go somewhere: it went to fuel the market rally, little of it went to the economy.

The unholy alliance of the Federal Reserve and the US Treasury

Source: JPM
  • Debt held by the public will exceed the size of the economy by the end of the Fiscal Year 2020 and eclipse the prior record set after World War II by 2023.

CEO at Galileo Global Advisors and Adjunct professor Columbia Law School.