Monday, April 13, 2020

Stock Market vs Unemployment?

3 comments:

Anonymous said...

Trump made a mistake in identifying his job performance with the performance of markets. Although I do try to avoid the suggestion that the laws of physics apply to markets, it is certainly true that things that can go up can also go down. That said, the stock market is highly idiosyncratic in the way it behaves, and it isn't nearly as important in the overall economy as many seem to think. Bond and credit markets are much important in the day to day operations of our economy. A business borrows money and pays back debt much more often than it sells stock.

I have been asked why the stock market is holding up while employment numbers are disastrous. Stock market moves are much easier to rationalize than predict, and stocks might yet crash. But more broadly, business is in the business of making money, not employing workers. And what a lot of people are thinking is that if and when the economy does improve, companies will employ fewer people which will benefit earnings, and therefore benefit stock prices.

--Hiram

John said...

Since a lot of the responsible citizens who do get out to vote have our retirement funds in stocks and bonds... I think they are both pretty important to the voters... :-)

Probably not very important to people who have no 401K, IRA, College Fund...

Anonymous said...

Most of the Trump rally is gone, and that seems to be bothering people. But those were mostly illusory gains anyway, based as they were on tax cuts rather than an actual improvement in the underlying businesses. I compare it to holiday shopping. Anyone who goes to a mall in December is boggled by the amount of business, and would have to include that the economy is booming. But December is always followed by January where the malls are empty, and the credit card bills arrive. Trump wise, we were in December for a long time but January has arrived, and what's worse, February might be on the way.

--Hiram