June 15, 2020Economy In the news News
What are Markets Thinking?
The question of the direction and divergence between financial markets and economic reality is a challenge at any time, but especially within a global pandemic. Recall that economic and financial trends always reflect different information at the same time. Economic statistics typically lag behind, such as unemployment rates and financial markets, such as stock markets earnings and indices look forward. During the ‘Corona-cession’, the gap between these important goal posts for investors has widened beyond historic norms. What does this gap mean?
“This too shall pass”
Recently, stock markets have absorbed the possibility that a second wave of COVID-19 may occur and have declined to close the gap but as our CIBC Economic partners point out, “Across the globe, we’re not yet seeing true “second waves.” Regardless, in the midst of at least three months of economic shut down, financial markets have optimistically recovered. “While Toronto stocks have more ground to make up, the S&P 500 was actually up 10% from a year earlier before this week, when a corona was a beer, not a virus, and economic activity was much stronger (see the chart).
Enjoy the full report from our Partners at CIBC Economics Research.
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