[Mises] The US economy is imprisoned, most of the population is under house arrest, and the inmates in Washington are running the asylum. And yet while the nation appears to be walking the green mile, investors residing in the Wall Street cell block have been extended pardons from the market gods. Prisoners in the Main Street general population wing of the jail are stuck consuming gruel, manufacturing license plates, and marrying old maids with a dozen cats. The bats not only triggered a severe respiratory illness pandemic, but also sparked a serious case of insanity.
AMERICA IN ONE IMAGE?
Justin Horwitz, a Democratic strategist, tweeted a screenshot
[in link]
that was meant to showcase "everything that is wrong with America." It featured CNBC’s Jim Cramer celebrating the Dow Jones Industrial Average’s best week since 1938 and a network chyron that read "More than 16M Americans have lost jobs in 3 weeks." The consensus on Twitter was unanimous: what the heck is happening?
On the surface, it does not make much sense. Today, millions of Americans are out of work, businesses are closed, and the gross domestic product is forecast to contract double digits in the first and second quarters. At the same time, the leading stock indexes have rebounded about 20 percent from their March 23 lows. Champagne is flowing on Wall Street, while blood is being shed on Main Street. Trying to grasp this market is like attempting to comprehend former vice-president Joe Biden speaking to the press.
Once you scratch that surface, you realize what is going on. It may not seem like a satisfying explanation, but at least you can understand the office water cooler talk between the bulls and the bears.
PAY IT FORWARD
Do you remember the annihilation that took place last month? The consecutive Black Mondays, the thousand-point swings, the margin calls, and the liquidation of trillions of dollars in assets? It was devastating to watch in real time for the faint of heart, especially if you are nearing retirement and desiring to spend the rest of your days sleeping in and eating cheesecake.
The March madness was pricing in the next quarter or two. Stock exchanges anticipated the rising confirmed cases and death tolls, the soaring jobless claims, the skyrocketing unemployment rate, the depressing earnings season, and every other piece of bad news relating to the coronavirus. This is why it seems befuddling when 6 million Americans file for unemployment benefits and the United States confirms 723 new deaths, but the S&P 500 jumps 2 percent.
Financial markets are always forward looking. Right now, the New York Stock Exchange is focusing on life after COVID-19, when society, it is hoped, returns to normal. There may be some detours along the way, but traders are assessing the future of the postcoronavirus world and searching for new opportunities to make a lot of money.
THE POWELL PUTSCH
And then there is the Federal Reserve System....
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