- by New Deal democrat
Last week I wrote that new stock market highs in the face of the worst US economic downturn since the Great Depression were primarily a function of a few stocks that are particularly tied to the global economy rather than tethered to the US; that those stocks also benefited from delivering online content or physical stuff to homebound consumers; and that the background long leading indicators favor an expanding economy once the pandemic is behind us.
In addition to Paul Krugman, here are two more commentators who have weighed in on the issue, making much the same points as I did.
Ritholtz links to an earlier piece from about a month ago:
“This is an S&P 500 index with tech stocks removed and adjusted for inflation. You can see two things. First, over the past three years it’s not very impressive. Second, it plunged in March thanks to COVID-19 and has never recovered completely.
“(And that’s even though this index includes powerhouses like Amazon, Google, and Facebook, none of which are categorized as “information technology.”)
“You can always remove the top performer from a broad stock index and produce a weaker looking trend. Still, this is more dramatic than usual. This isn’t just weaker looking, it’s practically flat. The collective performance of literally everything in the United States is kind of dismal except for companies like Microsoft, Apple, and Oracle.
“So when someone asks why the stock market is doing so great even though we’re in the middle of a massive pandemic, this is part of the answer: it’s not doing so great. Aside from tech stocks, the market has been ho-hum over the past few years and is still down 4 percent from its pre-pandemic level. Investors obviously have some confidence that the economy will rebound once we approve a vaccine and the pandemic is finally sidelined—as they should—but they’re hardly being cheerleaders for the overall economy. They just like tech stocks.”