The Writing Is on the Wall for a Stock Market Crash. Can Investors Read?

The stock market is trading as if a V-shaped recovery were a certainty when in fact it’s very unlikely.Laura Hoy@Laura_h_says

• The economy may have reached a bottom, but the stock market hasn’t.
• At some point, the stock market has to reflect the reality of the U.S. economy.
• The quick recovery many are banking on isn’t going to materialize.

At the start of May, the stock market got some great news: the recession is over. Economists at both Goldman Sachs and Morgan Stanley called the bottom of the U.S.’ economic decline.

But contrary to what many Donald Trump supporters and internet trolls believe, the economy isn’t the same as the stock market, though the two are somewhat intertwined.

Eventually, the stock market has to reflect the overall economy. The reason it doesn’t right now is that most investors are betting on a sharp, fast recovery. So the question of whether the stock market can hold its gains depends heavily on how long we bump along this desolate bottom.

The Stock Market Can’t Climb Until The Economy Does

Despite the reopening of economies around the world, it’s probably going to take years to get back to where we were at the start of 2020. The University of Chicago’s Becker Friedman Institute believes that many of the jobs lost in the pandemic won’t return—11.6 million of them, to be exact.

That’s mainly because of the massive shift in the global economy that coronavirus has accelerated. A good example is in retail, where brick-and-mortar department stores had already become relics from the time before e-commerce. Now, they’ve been forced to sink or swim as foot traffic has shut down completely. They’re mainly sinking.

It’s happening in other aspects of the economy as well—businesses are restructuring, cutting jobs, changing the way they operate, and allowing employees to work from home. There’ll be less travel and, therefore, fewer pilots, cabin crew, and check-in agents. There’ll be fewer planes, and as such fewer engineers who build and maintain them. The list goes on and on.

Leading Indicators Show More Economic Pain Ahead

The glaring evidence of this shift is evident in new trailer orders from U.S. Trucking companies. In April 2019, 15,000 new trailers were ordered. This year the order totaled just 300……..more here

Click here for reuse options!
Copyright 2020 Hiram's 1555 Blog