'Repeat After Me: The Markets Are Not the Economy' diff viewer (4/5)

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Repeat After Me: The Markets Are Not the Economy	Repeat After Me: The Markets Are Not the Economy
2020-06-10 03:32:13 UTC	2020-06-12 20:00:57 UTC (3 days later)
The stock market looks increasingly divorced from economic reality.	The stock market looks increasingly divorced from economic reality.
The United States is on the brink of the worst economic collapse since the Hoover administration. Corporate profits have crumpled. More than a million Americans have contracted the coronavirus, and hundreds are dying each day. There is no turnaround in sight.	The United States is on the brink of the worst economic collapse since the Hoover administration. Corporate profits have crumpled. More than a million Americans have contracted the coronavirus, and hundreds are dying each day. There is no turnaround in sight.
Yet stocks keep climbing. Even as 20.5 million people lost their jobs in April, the S&P 500 stock index logged its best month in 33 years. After a few weeks of wild swings, the market is down a mere 9.3 percent this year and 13.5 percent from its peak — what most investors would consider a correction. On Friday, after the government released the staggering unemployment figures, the S&P 500 closed up 1.7 percent.	Yet stocks keep climbing. Even as 20.5 million people lost their jobs in April, the S&P 500 stock index logged its best month in 33 years. After a few weeks of wild swings, the market is down a mere 9.3 percent this year and 13.5 percent from its peak — what most investors would consider a correction. On Friday, after the government released the staggering unemployment figures, the S&P 500 closed up 1.7 percent.
Conventional wisdom would explain the market’s comparatively modest losses this way: Since markets tend to be forward-looking, investors have already accounted for what’s expected to be a cataclysmic drop in second-quarter activity and are forecasting a relatively rapid economic recovery afterward. The Federal Reserve’s actions have also bolstered investors’ confidence that the bottom won’t fall out of the market.	Conventional wisdom would explain the market’s comparatively modest losses this way: Since markets tend to be forward-looking, investors have already accounted for what’s expected to be a cataclysmic drop in second-quarter activity and are forecasting a relatively rapid economic recovery afterward. The Federal Reserve’s actions have also bolstered investors’ confidence that the bottom won’t fall out of the market.
But the pandemic has also highlighted a deeper trend. For decades, the market has been growing increasingly detached from the mainstream of American life, mirroring broad changes in the economy.	But the pandemic has also highlighted a deeper trend. For decades, the market has been growing increasingly detached from the mainstream of American life, mirroring broad changes in the economy.
“Wall Street has very little to do with Main Street,” said Joachim Klement, a market analyst at Liberum Capital in London. “And less and less so.”	“Wall Street has very little to do with Main Street,” said Joachim Klement, a market analyst at Liberum Capital in London. “And less and less so.”
Still, the market retains its grip on the collective imagination. From politicians and corporate executives to mom-and-pop investors, Americans have long relied on the stock market as a proxy for the U.S. economy — for reasons that are partly historical. Its crests suggested bright days ahead, while its troughs suggested a darkening outlook. The current economic fallout, however, could snap any illusions that the logic of the market is derived, in any consistent way, from real-world events.	Still, the market retains its grip on the collective imagination. From politicians and corporate executives to mom-and-pop investors, Americans have long relied on the stock market as a proxy for the U.S. economy — for reasons that are partly historical. Its crests suggested bright days ahead, while its troughs suggested a darkening outlook. The current economic fallout, however, could snap any illusions that the logic of the market is derived, in any consistent way, from real-world events.
Part of the reason is the makeup of the stock market, and the fact that the giant companies that make up the S&P 500 operate under very different circumstances than the nation’s small businesses, workers and cities and states. They are highly profitable, hold significant sums of cash and have regular access to public bond markets. They’re far more global than the typical American family firm. (Roughly 40 percent of the revenues of S&P 500 companies come from abroad.)	Part of the reason is the makeup of the stock market, and the fact that the giant companies that make up the S&P 500 operate under very different circumstances than the nation’s small businesses, workers and cities and states. They are highly profitable, hold significant sums of cash and have regular access to public bond markets. They’re far more global than the typical American family firm. (Roughly 40 percent of the revenues of S&P 500 companies come from abroad.)
In 2015, about 600,000 U.S. companies counted at least 20 employees, and only 3,600 of those — or less than 1 percent — were publicly listed, said René Stulz, a professor of finance at Ohio State University, who has studied the changing composition of publicly traded markets.	In 2015, about 600,000 U.S. companies counted at least 20 employees, and only 3,600 of those — or less than 1 percent — were publicly listed, said René Stulz, a professor of finance at Ohio State University, who has studied the changing composition of publicly traded markets.
Because the financial strength of big companies makes them more likely to survive the downturn, their share prices tend to underplay the impact of a widespread economic collapse. In fact, market indexes like the S&P 500 are weighted to reflect the performance of the largest and most profitable companies. In recent weeks, the stocks of such companies have not only veered in the opposite direction of the outlook for the U.S. economy, but from the rest of the stock market itself.	Because the financial strength of big companies makes them more likely to survive the downturn, their share prices tend to underplay the impact of a widespread economic collapse. In fact, market indexes like the S&P 500 are weighted to reflect the performance of the largest and most profitable companies. In recent weeks, the stocks of such companies have not only veered in the opposite direction of the outlook for the U.S. economy, but from the rest of the stock market itself.
The five largest listed companies — Microsoft, Apple, Amazon, Alphabet and Facebook — have continued to climb this year, as investors bet these behemoths will emerge in an even more dominant position after the crisis. Through the end of April, these companies were up roughly 10 percent this year, while the 495 other companies in the S&P were down 13 percent, according to Goldman Sachs analysts. These highly valued firms — Microsoft, Amazon and Apple are each worth more than $1 trillion — now account for one-fifth of the market value of the index, the highest level in 30 years.	The five largest listed companies — Microsoft, Apple, Amazon, Alphabet and Facebook — have continued to climb this year, as investors bet these behemoths will emerge in an even more dominant position after the crisis. Through the end of April, these companies were up roughly 10 percent this year, while the 495 other companies in the S&P were down 13 percent, according to Goldman Sachs analysts. These highly valued firms — Microsoft, Amazon and Apple are each worth more than $1 trillion — now account for one-fifth of the market value of the index, the highest level in 30 years.
“It’s very easy to get confused by looking at the S&P doing well and that being driven by a relatively small subset of firms which aren’t really affected by this virus and actually gain from it,” said Mr. Stulz.	“It’s very easy to get confused by looking at the S&P doing well and that being driven by a relatively small subset of firms which aren’t really affected by this virus and actually gain from it,” said Mr. Stulz.
Nor does the mood of the market necessarily reflect the sentiment of a broad swathe of Americans. While U.S. stock markets are more democratic than most, with more than half of American households owning shares or investment funds like mutual funds, the overwhelming majority of stock accounts are relatively modest. Rather, stock ownership is heavily skewed to the richest segments of the population, who are least likely to feel the pain of an economic downturn.	Nor does the mood of the market necessarily reflect the sentiment of a broad swathe of Americans. While U.S. stock markets are more democratic than most, with more than half of American households owning shares or investment funds like mutual funds, the overwhelming majority of stock accounts are relatively modest. Rather, stock ownership is heavily skewed to the richest segments of the population, who are least likely to feel the pain of an economic downturn.
“Stock ownership among the middle class is pretty minimal,” said Ed Wolff, an economist at New York University who studies the net worth of American families. He added: “The fluctuations in the stock market don’t have much effect on the net worth of middle-class families.”	“Stock ownership among the middle class is pretty minimal,” said Ed Wolff, an economist at New York University who studies the net worth of American families. He added: “The fluctuations in the stock market don’t have much effect on the net worth of middle-class families.”
In fact, a relatively small number of wealthy families own the vast majority of the shares controlled by U.S. households.	In fact, a relatively small number of wealthy families own the vast majority of the shares controlled by U.S. households.
The most recent data from the Federal Reserve shows that the wealthiest top 10 percent of American households own about 84 percent of the value of all household stock ownership, according to an analysis by Mr. Wolff. The top 1 percent controlled 40 percent of household stock holdings.	The most recent data from the Federal Reserve shows that the wealthiest top 10 percent of American households own about 84 percent of the value of all household stock ownership, according to an analysis by Mr. Wolff. The top 1 percent controlled 40 percent of household stock holdings.
Economists who have studied the performance of stock markets over time say there’s relatively little evidence that economic growth matters to the outcome of the market at all.	Economists who have studied the performance of stock markets over time say there’s relatively little evidence that economic growth matters to the outcome of the market at all.
“The linkage is actually pretty weak,” said Jay Ritter, a finance professor at the University of Florida who has studied the long-run relationship between economic growth and market returns in world markets. “In the longer run, the relationship is, empirically, it’s not there.”	“The linkage is actually pretty weak,” said Jay Ritter, a finance professor at the University of Florida who has studied the long-run relationship between economic growth and market returns in world markets. “In the longer run, the relationship is, empirically, it’s not there.”
None of this is a secret. So why do millions of Americans continue to think the market really is a barometer on the economy? That’s more a question of history and culture than economics.	None of this is a secret. So why do millions of Americans continue to think the market really is a barometer on the economy? That’s more a question of history and culture than economics.
~~Updated June 5, 2020~~	Updated June 12, 2020
	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.	So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.	A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.	Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.	Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.	Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.	The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.	If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.	If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Historians say the stock market’s link in the American psyche to the economic health of the country goes back, at least, to the 1929 crash.	Historians say the stock market’s link in the American psyche to the economic health of the country goes back, at least, to the 1929 crash.
“You can think of the Great Crash as almost traumatizing Americans,” said Janice Traflet, a financial historian at Bucknell University’s Freeman College of Management.	“You can think of the Great Crash as almost traumatizing Americans,” said Janice Traflet, a financial historian at Bucknell University’s Freeman College of Management.
With little quality economic information, many Americans saw the 1929 market collapse — the S&P fell an astounding 86 percent before bottoming in 1932 — as the event that caused the Great Depression. The close connection between the health of the economy and the health of the markets, in the minds of many Americans, had been forged.	With little quality economic information, many Americans saw the 1929 market collapse — the S&P fell an astounding 86 percent before bottoming in 1932 — as the event that caused the Great Depression. The close connection between the health of the economy and the health of the markets, in the minds of many Americans, had been forged.
“Whether or not they were right or wrong that’s the way many Americans interpreted it. And sometimes perceptions become the reality,” said Ms. Traflet.	“Whether or not they were right or wrong that’s the way many Americans interpreted it. And sometimes perceptions become the reality,” said Ms. Traflet.