The disconnect between the financial system and the stock market
On eight June 2020, the World Well being Group (WHO) introduced that the Covid-19-19 pandemic was worsening across the globe and warned in opposition to complacency: “most people globally are still susceptible to the infection. (…) More than six months into this pandemic, this is not the time for any country to take its foot off the pedal”.
On the exact same day, the US stock market started its fourth consecutive week of rally. The S&P 500 index is again to the place it was in the beginning of 2020, erasing the historic plunge (one-third of its value) that befell between 20 February and 23 March 2020, as if nothing had ever occurred. Is there something unusual in regards to the stock market behaviour throughout this time? Because the world suffered from the worst financial disaster because the Nice Despair (Baldwin and Weder di Mauro 2020a, 2020b, Bénassy-Quéré and Weder di Mauro 2020, Coibon et al. 2020), the response of stock markets raises critical issues. For the reason that starting of the disaster, stock costs appear to be operating wild.
At first, they ignored the pandemic, then panicked when Europe turned its epicentre. Now, they’re behaving as if the thousands and thousands of individuals contaminated, the 400,000 deaths and the containment of half the world’s inhabitants may have no financial impression in spite of everything.