Wall Street and Main Street have gotten a divorce, or at the very least they have separated. The U.S. is in a recession but the stock market marches blindly higher. In most people’s lives we have never seen such a confluence of dangers: Depression levels of unemployment, the economy in a downward spiral, prevalent rioting and unrest, and an imminent second wave of the virus. Yet the stock market continued upward and celebrates information, such as jobs data that is slightly misleading. The S&P 500 has had the biggest rally in its history. It plummeted 34% from its mid-February high to bottom on March 23. It has since rocketed up 43%.

We have long been told that the market is forward thinking, and the economy looks backward. But these are unprecedented times. Economic data has surprised to the upside but has already lagged again making the data stale almost immediately. Uncertainties, which the market hates, are in abun- dance. Will states shut down again (as some are already doing)? When will a vaccine be available? How many businesses will permanently close? Will generous unemployment benefits and another stimulus be extended? And the big looming question, who will win the Presidential election in November? Many small businesses, which have been hit the hardest, are not publicly traded so they are not reflect- ed in the market. We seem to be a market of wishful thinkers, but if just one of the cogs in the wheel fails to work, what are the implications? Has the market taken that all into account?

An explanation for a continued bullish market is that the worst is behind us and the economy will re- bound quickly. FOMO (fear of missing out) is at play here. Who wants to miss out on performance like we have seen the last 10 years? We also locked a population down with nothing to do, no sports to watch, no casinos to go to, and then put a stimulus check in their pockets. Robinhood, which caters to amateur traders, reported a record 3 million new accounts in the first quarter.


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