And a stock market that marches ever higher.
The recent U.S. market turmoil from the coronavirus pandemic feels like eons ago.
The S&P 500 cratered 34% from its high in mid-February to its trough on March 23, the quickest decline of its kind in history.
Yet stocks rebounded with vigor, despite bleak economic news and protests spreading across the U.S. following the death of George Floyd, a black man, while being subdued by a white police officer.
As of Tuesday’s market close, the S&P 500 had swelled 38% from its bottom, within reach of fully erasing its recent losses. In fact, this has been the best 50-day rally in the history of the U.S. stock index.
The S&P 500 was up another 1% as of noon ET on Wednesday.
It’s a “huge disconnect” from reality on the ground, said Robert Jenkins, head of global research at Lipper.
“The disconnect from basic human suffering is shocking,” Jenkins said. “It gets more and more insane by the day.”
Today vs. tomorrow
However, the divergence makes sense for several reasons, according to market experts.
Namely, the stock market is not the economy.
Stock investors are looking beyond present conditions toward what they believe will happen in the future — which they’re currently viewing with optimism, experts said.
“One is looking at today, the other is saying where am I going,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said of the difference between the economy and stock market.
“The market is saying, ’We know where we are today, but where are we going tomorrow? In this case, tomorrow is 2021,” Silverblatt said.
The Covid-19 public health crisis pushed states to shutter broad swaths of their economies starting in mid-March to quell the spread of the disease.
Nearly 41 million Americans have since filed for unemployment benefits, shattering prior records.
The country’s 14.7% official unemployment rate in April was its highest level since the Great Depression, when it peaked above 25%. The rate will almost undoubtedly be higher when the Labor Department reports data for May on Friday.
Meanwhile, gross domestic product, a measure of U.S. total economic output, dropped 5% in the first quarter of 2020. The Federal Reserve Bank of Atlanta estimates GDP may crater nearly 51% in the second quarter.
Yet, the S&P 500 is down just 4.6% since the beginning of the year.
“You’ve got to be kidding me,” Silverblatt said. “4%? You meant 40%.”
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