This week was a wild ride on Wall Street.
Depending on the day the headlines either celebrated a booming market or bemoaned worrying plunge.
On Wednesday the stocks hit record highs – the Dow Jones spiked above 29,000 for the first time since February and came within 500 points of its all-time record level. Bloomberg described their terrain as “Euphoric land.”
Then Thursday, the market had its worst day since June. The Dow fell more than 900 points, with the S & P 500 down 4% and the NASDAQ down more than 5.5%.
Despite this volatility overall the market is up since it took a COVID hit in February.
And that might strike you as odd. Why is the market steadily climbing while the rest of the economy is struggling?
One big reason: Conditions around COVID-19 helped lift some stocks – especially the big tech stocks like Apple, Facebook and Microsoft.
But there’s more to it than that: The truth is, the stock market doesn’t reflect the real economy.
The real economy is measured by factors like inflation, unemployment, debt, household income, poverty levels – and by those metrics, we are not doing well.
This year the GDP – which reflects the strength of our economy – had its worst quarter in 145 years.
Tens of millions of Americans are unemployed. This recession is hitting low-wage workers the hardest and they’re the least prepared to weather the storm. This pandemic has triggered at least three times the number of job losses as 2008 and put four times as many people on government unemployment insurance. According to Feeding America, more than 54 million Americans may experience food insecurity thanks to the impact of COVID-19.
The stock market doesn’t necessarily reflect that grim reality.
One reason: Investors aren’t looking at the current economy. They’re betting on the future performance of certain large companies – and lately investors have been betting big.
Some market analysts say the market is due for a correction. It’s possible that’s starting now. Or the market may continue to be disconnected from the real economy – watch the video above to learn more.
