United States

• Diverge: Wall Street and Main

Street
• After mid march stock rises
again i.e. recovery started but
employment raised from 4 to
14%.
• Stock market going up or down
does not imply it is same for
economy also.
• As Dow jones has only 30 and
S&P 500 has only 500
companies out of total 30
million companies of US.
• most people assume stock prices are closely linked to
profits and profits only but that's not really what's going on.
• the recent stock market recovery can be explained by two
other factors. so when a disaster hits this country like covid
19, the Federal Reserve i.e the central bank of US lowered
interest rates and that boosted stocks. Lower interest rates
make borrowing money cheaper so big businesses tend to
increase spending and investors can take more risks.
• a lot of financial looking at is the demise of competition. as
the covid 19 shutdown expands more and more companies
are at risk of bankruptcy. if you take one of the few big
players out of the market that means there is less
competition for the others and once people decide to again
use these company services there's less price competition
that will boost company future profits.
• this highlights another important thing to remember about
the stock market, ie. it focuses on the future. if investors
believe the worst parts of the pandemic are in the past that
means there's nowhere to go but up.
• but the country's economic health depends on more
than stocks things like GDP consumer spending housing
values and employment.
• the labor market is a more important indicator to
measure because that looks at how much people are
able to work, what their pay is. that is really how people
make ends meet in the economy.
• the Bureau of Labor Statistics (US) stated that of the 20
million newly unemployed, 18 million were on temporary
layoff. so the big question is will all these people return
to work and as States ease quarantine measures and
businesses reopen is it safe to say that the worst is
behind us.
• it is possible that it will rebound faster than the Great
Recession but we don't know with the rebound what will
happen because we don't know when this is going to be
over because essentially we're waiting on a vaccine right
and that takes time.
https://www.cnbc.com/2020/09/18/markets-are-up-and-the-
economy-is-down-some-next-moves-for-investors.html
• The disconnect between a struggling economy and booming markets can be disconcerting for investors.
• Markets are recovering based on hopeful signs for the near future, including the development of Covid-19 vaccines.
• To begin with, the financial markets were doing quite well before the pandemic. In fact, the S&P 500 Index closed at
a record high (3,386) on Feb. 19. But once Covid-19 cases started spreading in the U.S., the markets plunged. By
March 23, the S&P 500 had fallen about 34%.
• By the end of the first week in August, the S&P 500 had risen nearly 50% since March 23, regaining almost all the
ground it had lost. Meanwhile, at the same time of this market rally, the overall economy took a hit.
• In fact, gross domestic product fell 9.5% in the second quarter of the year – the largest quarterly drop since 1947. If
businesses are producing and selling fewer goods and services, shouldn’t it follow that the accompanying damage,
in the form of massive lost revenue, would also lead to a sharp decline in the stock prices of these businesses?
• There’s something of a time warp between what’s happening in the economy and the performance of the financial
markets. Essentially, the economy is a reflection of what’s happening today, but the markets are always looking
toward tomorrow.
• This pattern can be seen in recent market action. The 34% sell-off in February and March took place when
unemployment was near 50-year lows, as the market declines reflected concerns over the growing pandemic and
the anticipation of the resulting recession. But now, stocks have rallied in expectancy of a better economic
environment in the second half of 2020 and into 2021 as economic activity recovers.
India
• https://www.bloombergquint.
com/markets/economy-down-
stock-market-up-why-this-diss
onance
• https://www.youtube.com/wa
tch?v=Zq8HpaqV0_c
• FDI increasing, speculation
increasing causing surge in
stock prices.
• Also people are confident of
future growth as vaccine
development is going on at
fast pace.
 • Till April,
• In US: 2.6 crores people
lost job
• In India: 3 crores people
lost job.

June